Interest rate may reach 5 per cent

The Bank of England may raise interest rates to around 5 per cent in the future, a member of its Monetary Policy Committee has claimed.

Paul Fisher said officials hoped to see the current base rate of 0.5 per cent boosted to a "normalised" level 10 times as big.

Mr Fisher warned that homeowners should expect a series of increases in the future but added that there was "no reason" for the change to be introduced quickly.

He said that the committee's goal was to get interest rates to around 5 per cent, but said the reaction of the public to the changes would be built into its forecasts and policy decisions.

Mr Fisher told the Daily Telegraph: "We hope people are aware that interest rates at some point will go up again and that they will head back to a normalised position.

"Now the speed at which that happens is another thing entirely. There's no reason why the pace should be more precipitative. We would only tightening quickly if the strength of the economy did demand it.

"So obviously we would not be putting up rates so quickly as to cause that sort of negative reaction. That's something we can try to anticipate and build in. So we would put rates up, see what the effect is and then judge how quickly to go."

While Mr Fisher said he did not think a change of either 0.25 per cent or 0.5 per cent was going to trigger a recession, he added that it was necessary to "trigger the mindset in people that that's where rates will eventually go back to".

Copyright © Press Association 2010