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Interest Rates and the UK economy

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  • Barrell, Ray
  • Kirby, Simon

Abstract

At the beginning of 2007 inflation was in excess of its upper threshold of 3 per cent and the Governor of the Bank of England had to write a letter to the Chancellor explaining why this had happened and what measures were to be taken to remedy this. It was our opinion that interest rates had been too low for eighteen months. It was also our opinion that the Bank had kept them too low because it anticipated wrongly that inflation would have accelerated if interest rates had been inappropriately set. In August 2005 the Bank of England cut interest rates by a quarter of a point, and held them at 4.5 per cent for around a year, before introducing five interest rate increases in the subsequent twelve months.

Suggested Citation

  • Barrell, Ray & Kirby, Simon, 2007. "Interest Rates and the UK economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 202, pages 61-64, October.
    • Handle: RePEc:cup:nierev:v:202:y:2007:i::p:61-64_6
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    Cited by:

    1. Ray Barrell & Ian Hurst & Simon Kirby, 2008. "Financial Crises, Regulation and Growth," National Institute Economic Review, National Institute of Economic and Social Research, vol. 206(1), pages 56-65, October.

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