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UK interest rates likely to hit 5% in a decade, says Bank of England deputy UK interest rates likely to hit 5% in a decade, says Bank of England deputy
(about 2 hours later)
Interest rates are likely to hit 5% within a decade, according to the outgoing Bank of England deputy governor for monetary policy.Interest rates are likely to hit 5% within a decade, according to the outgoing Bank of England deputy governor for monetary policy.
Sir Charlie Bean said it would be "reasonable" to expect borrowing costs to return to pre-recession levels in the long term – between five and 10 years.Sir Charlie Bean said it would be "reasonable" to expect borrowing costs to return to pre-recession levels in the long term – between five and 10 years.
Homeowners have enjoyed a historically low 0.5% base rate for five years but the level has caused misery for savers.Homeowners have enjoyed a historically low 0.5% base rate for five years but the level has caused misery for savers.
Bean told Sky News: "It might be reasonable to think that in that long term you would go back to 5% but it's probably quite a long way down the road."Bean told Sky News: "It might be reasonable to think that in that long term you would go back to 5% but it's probably quite a long way down the road."
Earlier this week, the Bank of England governor, Mark Carney, urged people to focus on the "big picture" rather than obsessing about when interest rates would start to rise. Earlier this week, the Bank of England governor, Mark Carney, urged people to focus on the "big picture" rather than obsessing about when interest rates would rise.
It followed accusations that he had been behaving like an "unreliable boyfriend" by hinting at a rise this year, before appearing to back-pedal.It followed accusations that he had been behaving like an "unreliable boyfriend" by hinting at a rise this year, before appearing to back-pedal.
Carney insisted the important aspect for homeowners and businesses was that rates were likely to stabilise at about 2.5% in three years' time, rather than the historically "normal" level of 5%.Carney insisted the important aspect for homeowners and businesses was that rates were likely to stabilise at about 2.5% in three years' time, rather than the historically "normal" level of 5%.
Bean, who leaves his job on Monday, said market expectations that the first increase in interest rates would come at the turn of the year were "reasonable".Bean, who leaves his job on Monday, said market expectations that the first increase in interest rates would come at the turn of the year were "reasonable".
He added: "The market has rates going up to 2.5% over next three years. That seems like a broadly sensible judgment."He added: "The market has rates going up to 2.5% over next three years. That seems like a broadly sensible judgment."
Bean admitted that in the runup to the crash, economists were "not sufficiently cognisant of the risks building up in the financial system" but insisted the economy was far more resilient than when he arrived at the central bank in 2000.Bean admitted that in the runup to the crash, economists were "not sufficiently cognisant of the risks building up in the financial system" but insisted the economy was far more resilient than when he arrived at the central bank in 2000.