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IMF urges Bank of England to keep interest rates low
Households and businesses should be told that borrowing costs will remain at rock-bottom levels until the economy is motoring again, the International Monetary Fund has said.
The global watchdog urged the Bank of England to “provide assurance” that interest rates will be “kept low until the recovery reaches full momentum”, the Daily Mail reports.
The Bank does not offer such forward guidance at the moment but it could start doing so under Mark Carney, the Canadian who succeeds Sir Mervyn King as governor on 1 July.
Carney has promoted long-term commitments to low interest rates at the Bank of Canada and has been asked by Chancellor George Osborne to assess whether such a policy would work in Britain.
Such guidance could give confidence to borrowers worried about a sudden rise in interest rates as the economy recovers – although it could hammer savers at the same time by driving down returns.
The IMF also said the Bank should consider unleashing another round of money printing, having already pumped £375bn into the economy through its quantitative easing programme.
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The recommendations – in the Fund’s annual report on the UK – came as officials at the Bank remained spilt over how to nurture the nascent recovery.