OECD wants UK to raise interest rates

The organization for Economic Co-operation and Development is of the opinion that Bank of England should start raising interest rates on a slow pace in order to beat inflation. OECD wants UK to raise its key interest to 1% by the end of 2011 and 2.25% by the end of 2012. It feels that a raise would definitely help to prevent further increases in public inflation expectations. According to the six monthly reports on the Global economy, OECD states that an increase in interest rates should take place during 2011 in order to break off increases in inflation expectations.

In March, OECD had predicted 1.5% of UK’S 2011 GDP growth. But now it has lowered its forecast with regard to UK’S 2011 GDP growth to be 1.4%. Also, the growth estimate for the year 2012 has been also lowered to 1.8%. Previously, it was estimated 2%. Most of the bank’s policy makers feel that the economic recovery is too fragile to withstand a rise in this present situation. Hence, Bank of England has kept the base rate of interest at a low record of 0.5% for more than two years. According to OECD, Global recovery is under way but it is taking place at various speeds across different countries.... Read More