Ajay said: “I was pleased to report the growing strength of the North East property market to Sir Jon – characterised by strengthening house prices and strong rental yields for property investors. As part of that meeting I put forward the case for a limited and gradual rise in interest rates too – something I have been advocating for some time.
We need to wean ourselves off the idea that near-to-zero interest rates are normal. They aren’t. They are a short-term response to the financial crisis which have somehow become a permanent part of our economy for the best part of ten years. Holding interest rates unnaturally low indefinitely is the economic equivalent of sustaining wartime rationing into the 1960s. With the economy growing, employment high and inflation non-existent, if we don’t grasp the nettle now, when do we?
We have falling unemployment and pay packets are finally starting to grow. In the last couple of quarters we’ve started to see productivity come back too. Although this hasn’t been reflected in inflation yet, that is largely down to external factors falling oil prices. In 18 months time we might be grateful for taking the opportunity to head off inflation now.
We also need to clear the system of ‘zombie’ companies who have held on due to low interest rates. This would give more robust businesses space to prosper, leading to increased productivity and economic growth.
Regardless of what decision its Monetary Policy Committee take, it’s both impressive and admirable that the Bank of England would go to such lengths to consult with and take counsel from different business sectors in different regions.”
