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Rejecting Calls for an Early Interest Rate Rise

Rejecting Calls for an Early Interest Rate Rise

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.

Important information

Past performance is not a guide to future returns. The views expressed are those of Peter Elston at the time of writing and are subject to change without notice. They are not necessarily the views of Seneca Investment Managers and do not constitute investment advice. Whilst Seneca Investment Managers has used all reasonable efforts to ensure the accuracy of the information contained in this communication, we cannot guarantee the reliability, completeness or accuracy of the content.

Seneca Investment Managers Limited is authorised and regulated by the Financial Conduct Authority and is registered in England No. 4325961 with its registered office at Tenth Floor, Horton House, Exchange Flags, Liverpool, L2 3YL. FP15/85.

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