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Interest rates could rise to 5% within 10 years

30th Jun 14 10:09 am

The Bank of England’s base rate has been held at 0.5% for more than five years now.

Governor of the Bank of England Mark Carney suggested last week that 2.5% would become the “new normal” by 2017.

And now the outgoing deputy governor for monetary policy, Sir Charlie Bean, has said the rate could rise to 5% in the “long term”, which is being taken to mean within the next 10 years.

In an interview with Sky News, Sir Charlie was asked if the rate could return to 5% within a decade.

“That may well be so. I wouldn’t want to say it will be back there in 10 years,” he said.

“It might be reasonable to think that in that long term you would go back to 5% but it’s probably quite a long way down the road.”

The rate has traditionally been around 4-5%, and was at that level pre-recession, so 5% is considered “neutral”.

Sir Charlie also said: “The market has rates going up to 2.5% over the next three years. That seems like broadly sensible judgement.”

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