There are few things that are less certain right now than the path of interest rates in the UK. That’s despite the Bank of England’s attempts to reassure investors that it will not raise its key interest rate anytime soon from the record low level of 0.5%. Even when it does, it will do so in a gradual manner, the central bank says.
Ever since the Conservatives came to power in 2010, austerity has dominated the UK budget. It was a policy introduced to reduce the yawning budget deficit, which made the country vulnerable to attacks from the bond vigilantes.
The story on the need to bail out households just like we bailed out the banks has sparked some controversy. To some extent, this was to be expected – but the truth is that forgiving household debt is the only real way out of the crisis.
Indebted households in the UK and more widely need a bailout just like the financial sector got one, in order for the economic recovery to take root, according to Dr. Johnna Montgomerie, lecturer in economics at the Political Economy Research Centre (PERC), Goldsmiths University of London.
If you’ve finished the champagne you popped open the other day to celebrate the good news on Stamp Duty in Chancellor George Osborne’s Autumn Statement, perhaps it’s time to consider the negative implications of the expectations regarding household debt.