UK warned of ‘indefinite’ low interest rates
Adair Turner, former chairman of the now defunct regulator the UK Financial Services Authority, has issued a warning that interest rates in the country could remain at current low levels “indefinitely” unless radical policies are adopted to push growth in the economy.
The current Bank of England base rate of 0.5% might not go above 2% before 2020, he suggested.
Turner, who made the comments in an interview with the BBC, also warned of the rise in so called peer-to-peer lending, as investors chased additional returns because of the low interest rate environnment, while borrowers shunned by traditional lenders found lenders willing to take on higher levels of risk.
But the rise in lending agreed at higher levels of risk carries with it the possibility that steep losses could occurr in the P2P sector over the coming decade, Turner warned.
He also highlighted the looming referendum on a UK exist from the EU as a destabiliser in the shorter term for the UK economy. This, he said, constituted an additional layer of uncerrtainty, right at a time when investors globally are already dealing with higher levels of market and political uncertainty.