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COUNTING THE COST OF HIGHER BASE RATES
Author(s) -
Sentence Andrew
Publication year - 1994
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/j.1468-0319.1994.tb00343.x
Subject(s) - exchequer , bust , overheating (electricity) , boom , economics , inflation (cosmology) , order (exchange) , interest rate , government (linguistics) , economic history , monetary economics , law , political science , finance , engineering , philosophy , linguistics , physics , electrical engineering , environmental engineering , politics , theoretical physics
It is a brave Chancellor of the Exchequer who raises interest rates when inflation is at record low levels and there are few signs of overheating. But Kenneth Clarke is clearly trying to give substance to his commitment ‐ made in June's Mansion House Speech ‐ to pursue stable monetary and fiscal policies. In that speech, the Chancellor told his City audience that the government had “not created the conditions for the strongest recovery in Europe in order to throw it away by creating yet another boom followed by bust”. There is widespread agreement with the Chancellor's objectives. But the difficult question for economic management is how high interest rates will need to go in order to contain inflation and keep the economy on course. In this Forecast Release, we examine this question as well as assessing the likely impact of the first rise in base rates for five years.