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Ex-PM John Major says BoE should hike interest rates to 5%

Former Prime Minister Sir John Major has called for the Bank of England to increase interest rates to as high as 5 per cent.

The Telegraph reports Major discussing the matter with grassroots Conservative members and warning that low interest rates are punishing savers.

In June, the Bank warned that a 2 per cent rise in interest rates would threaten the UK economy as a fragile recovery takes hold.

But Major said the Government should help pensioners being punished by “cripplingly unfair” low interest rates.

He also said the Bank of England ought to return interest rates to “normal levels, say three to five per cent” to ensure society treats “the saver as fairly as it treats the debtor”.

The Bank of England’s forward guidance policy means interest rates are likely to stay at 0.5 per cent until unemployment falls below 7 per cent.

They have been at current levels since March 2009 and there are currently no cash saving accounts paying above the rate of inflation.

Major, who was Conservative Prime Minister from 1990 to 1997, recently called for a windfall tax on energy companies profits in response to Labour’s proposed price freeze from 2015 to 2017.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Andy Wilson, Lincoln 11th November 2013 at 12:53 pm

    I suspect The Telegraph reported only a snippet of John Major’s comments relating to the bank rate when he delivered a speech covering many subjects. As an ex Chancellor of The Exchequer Major would surely appreciate the finically devastating effects a mismanaged and mistimed hike in interest rates would have on the economy, mortgage borrowers, housebuilders and every allied industry. Perhaps instead of ‘should’ he may have suggested ‘would be good if…’.

    We all agree that savers are having it tough and have done for some years now. In a more stable economy then yes, things could return to a more equitable balance between the cost of borrowing and the return on savings. However for now the economy is showing signs of recovery with the UK ahead of all European countries so let’s leave things be until all of society can cope and benefit with the change, not just the retired savers his speech apparently targeted.

  2. How does Mr Major propose the govt helps the 300,000 families that would be repossessed if his suggestions were acted upon?

  3. And how would the devastating impact of such a rise on business borrowers do anything other than dash economic recovery on the rocks? Businesses would fail, unemployment would rise, as would the costs of social security benefits, people would lose their homes, crime rates would increase. Or hasn’t Mr Major considered such consequences?

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