It is reassuring to see in today’s Financial Times that Andy Haldane, the Bank of England’s chief economist, is rejecting calls for an early interest rate rise.
I have argued previously that a premature rate rise would risk a repeat of what happened in the US in 1936, when the Fed increased rates slightly following a few years of moderate growth. The result was a severe economic contraction and a halving of the stock market.
According to the FT, Haldane notes that an early rate rise “would risk generating the very recession today it was seeking to insure against tomorrow.”
Haldane is not worried about wage growth, saying that his talks with businesses leave him “confident wages are not going to embark on a rocket-propelled ascent.” He also notes that Sterling’s rise will be more important in keeping inflation below the 2% target.
This should all be positive for Equities, which like low but not negative inflation and loose monetary policy.
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