Don’t be fooled by the UK interest rate bandwagon!!

Pound to Euro Forecast What Factors Influenced GBP/EUR Rates This Week?

Many market commentators are jumping on the good ‘ol UK Interest rate bandwagon at present. Every few months or so for the last ten years investors believe that the time has come for the UK to start raising interest rates. Whether it be to stoke high Inflation as now or to keep pace with the rest of the world which appears to be on paths to raising rates, the growing calls have come and gone over the years.

Ultimately we have seen the expectations quickly fade and with it of course the strength of the pound. Interest rates are in my opinion highly unlikely to rise since this would cause untold damage elsewhere in the economy. Savers already hit by low rates are now calling for rates to rise but what about the effect on those with mortgages?

The UK economy is in a very precarious place and raising interest rates will not help the economy, by encouraging people to save it will stifle growth and will not allow the economy the free reins it needs to grow. Brexit is a major unknown and whilst these calls for rates to rise grow, I think it would be a mistake and ultimately will not occur.

With the pound at a low level already we cannot expect Inflation to just keep rising, eventually it will settle down and so will the calls for a hike. When this happens the pound will fall and investors, economists and commentators will all go back to awaiting the next period for that interest rate bandwagon to come rolling back in….

If you have a transfer to make in the future buying or selling the pound interest rates are a key factor in determining the strength and weakness of sterling. Understanding interest rate predictions is crucial to understanding and predicting sterling movements. Sterling could easily slip back down quickly and if you need to buy or sell the pound making plans in advance is wise!

To learn more please get in touch with me Jonathan Watson by emailing [email protected]. Thank you for reading and I look forward to hearing from you!