Interest rate rise could mean shoppers are more careful
Thursday 2 August 2018
DR GORDON Fletcher, retail expert from the University of Salford Business School, comments on today’s decision by the Bank of England to raise interest rates for only the second time in a decade. Dr Fletcher says that wages will need to rise and that shoppers may be more careful with their money.
Dr Fletcher said: “The widely predicted interest rate rise commences the charting of new territory for a post-recession UK. The rise is only the second since the recession but still remains at 'emergency' levels in contrast to the 4% to 6% rates of a decade ago.
“For most households the first and most noticeable impact will be mortgage rate increases. However, more going out in mortgage repayments means less pounds to spend on luxury items and conscious choices being made to shop at budget retailers rather than at the high end or mid-range of the sector. To buffer the impact of increased interest rates households need to see an increase in wages to act as a counterweight without extreme changes that could in turn negatively impact on inflation.
“Interest rates, and this rise in particular, represent the economy's fine balancing act between lending rates, rate of inflation and other key measures of a strong economy such as average wages and low unemployment rates. But with only fractions of a single percent to deal with this balancing act has become very fine indeed as the UK attempts to control its inflation rate which is currently at a higher than expected 2.4%.”