Here’s one to get you all going….. will interest rates go up very soon, stay level (or will they go down)?

Pretty tough one and easy to offend someone out there. Well the savers of the UK are hurting, especially those reliant on their savings to fund their retirement years. On the other side the economy is not in rude health, what with GDP downgraded, unemployment outlook pretty poor.

Certain sectors of the ‘Fourth Estate’ will be buoyed up by OECD commentary that rates should go up and the clamour for the recent inflation to be controlled grows louder. Perhaps we should all take a deep breath and step back and have a look at what’s going on in the ‘long view’.

It is only just over two years since we had a massive increase in Monetary Growth (about 17.5%) and sure, there is an excess of money currently in the system. But as history has shown us recovering from a debt crisis takes time. It will take quite a while for our economy and the businesses and people within to rebuild their balance sheets.

The house view here at Accalon is that the recent inflationary spike brought on by external forces (currency rates, increasing energy and commodity prices) + the VAT hike is a short-term blip. The long term pattern is lower than that and we need to mention the ‘elephant in the room’, STAGFLATION.

If any of you have been Japan-watching over the last few decades, you will not have missed the turmoil that the Japanese economy went through. Their cardinal sin seems to have been chopping back their early growth and thus simply embedding the recession for many years to come.

Is the UK strong enough to start raising interest rates? Will this stop the current inflation increase triggered by forces pretty much outside the UK’s control?