According to an England Bank expert that low- interest rates will long next two decades and for the next ten years the financial analysts suggest that the investors and borrowers should get used to this scenario. A slum of 5% is expected in the coming ten years and the reason behind this fall in global interest rates is because of weak productivity and output.
The fall down in interest rates turns the borrowing cost deemed by the MPC in order to monitor inflation prevailing in the UK. McCafferty, one of the MPC member declared that there will be a rise of 4% in wage growth due to the labor shortage. It is expected that a time period of at least two years is required to rise the interest rates. The uncertain nature of Brexit is also a reason behind weakening the investment environment. Consumers and businessman are affected by this uncertainty scenario to a greater extent.
McCafferty was among those MPC members who strongly voted for a raise in interest rates from the emergency level interest rates. Decline in the financial setup in UK enforced the committee to make a strict financial policy. The output growth has also shown a declining trend and the reason found behind that lowered growth is the shortage of labors. Mc Cafferty also hinted towards labor scarcity as the basic constraint in economic growth of UK.
The Bank has forecast a rise in earnings in the coming year to approximately 3.25% but to attain this rise wage inflation should be reduced instantaneously.
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