- European Commission
For months we have urged for the Bank of England to start raising interest rates. Since then New Zealand has made already two adjustments to its monetary policy, while Mark Carney has not even managed to provide any hints on future moves. This week's Inflation Report can bring forward the implied data for the planned hike in rates from the somewhere in the middle of 2015, with February of March being the most probable options. The economy is on the track to prosperity, and two MPC members have already claimed there is no doubt ranks will be broken until the planned date. On the contrary, Mark Carney will resist to the bitter end. Actually, there are plenty of reasons to continue doing nothing.
Output in the U.K. economy has only just recovered to its pre-crisis levels. Growth in per capita income remains sluggish. At the same time, inflation is still falling, with wages still struggling to post solid growth in real terms. Another serious threat, is low investment. Carney has several times cited a lack of investment as an excuse for doing nothing. In fact, investment advanced 8% last year, with the same rate expected for this year. Even so, it will take a couple of more years to bring investment back to pre-crisis level. The last but not least, it is a low level of gross capital formation, a broad gauge of how much of output is reinvested back into the nation's future. Partially, it can be explained by the large services sector, yet it also reflects disgracefully low savings rate.
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