George Osborne said on Thursday that UK interest rates will rise at some point as he warned that Britain faced a dangerous “cocktail of new threats from around the world.”
Speaking to business leaders in Cardiff, he said that he expected Britain to follow the Federal Reserve’s decision to raise interest rates last month.
Osborne said: “Of course, interest rates are not something for me to set. That’s for the independent Monetary Policy Committee at the Bank of England.
“But inevitably, with the US Federal Reserve having made their decision to raise rates last month, there is a discussion about how and when we begin to move out of a world of ultra-low rates.”
Interest rates have been at a record low of 0.5% since March in 2009 and economists widely expect to see a rise later this year.
The Chancellor said that the powers given to the Bank of England’s Financial Policy Committee over the buy-to-let mortgage market and overall levels of debt would make the economy “more resilient”.
“One of the biggest monthly bills many people pay is their mortgage – and an important source of income for people is their savings,” said the Chancellor.
“So it’s no wonder that people are starting to talk about what a rise in interest rates might mean for us all.
“Let’s be clear, higher interest rates are a sign of a stronger economy.”
Osborne confirmed that the BoE would be given powers to regulate the buy-to-let market in a surprise announcement last year.
The BoE has previously warned that the buy-to-let market is a potential threat to the UK’s economic recovery. There have been concerns that buy-to-let borrowers could be exposed following a downturn, which could hit the wider housing market and economy.
The speech was in stark contrast to the one he gave for the Autumn Statement in November when he announced the nation’s books were healthier than expected.
Osborne cautioned against the growing complacency that the economic job was complete, saying that anyone thinking it was “mission accomplished” with the British economy was making a grave mistake.
He pointed towards the economic slowdown in China and the growing economic problems of Brazil and Russia as evidence that Britain was still vulnerable.
“To the politicians peddling those views, I have a very clear warning today. Last year was the worst for global growth since the crash and this year opens with a dangerous cocktail of new threats from around the world. For Britain, the only antidote to that is confronting complacency and delivering the plan that we’ve set out,” he said.
