Borrowers are delighted but the despair drags on for savers as Bank of England governor Mark Carney has made it clear that there is no prospect of an early rise in UK interest rates.
Rates have stayed at a record low of 0.5 per cent since the height of the global financial crisis in 2009. March will mark the seventh anniversary of rock-bottom rates and, from Carney’s tone yesterday, we could well be “celebrating” the eighth in March 2017.
The governor used his first speech of the year to clarify his thoughts on the direction of borrowing costs. He didn’t have much choice, really, having promised six months ago that, by now, the prospect of a hike would have come into “sharper relief”.
Not for the first time, however, outside forces have derailed the likely rate rise timetable. Carney highlighted weaker growth in the UK and uncertain prospects for global growth and stability, given the worries over China and the turmoil on financial markets.
“The year has turned,” Carney said, “and, in my view, the decision proved straightforward: now is not yet the time to raise interest rates.”
Insisting there could be no firm timetable for a move, Carney told his audience of students at Queen Mary University in London that the central bank would “do the right thing at the right time on rates”, whenever that might be.
For City economists, who had pencilled in a move in the summer or autumn of this year, Carney’s comments were taken to mean rates could remain unchanged this year, and even for the first half of 2017.
Reflecting that, sterling slumped to a seven-year low against the dollar as the governor spoke, at $1.40. Against the euro, it was at its lowest level for almost a year, at €1.30.
As one dealer said, Carney didn’t simply kick a rate rise into the long grass, he “hoofed it right out of the park”.
Prospects for UK rates remain "as clear as mud", said David Lamb of currency dealer Fexco. Others were more outspoken. Calum Bennie, savings expert at Scottish Friendly, said Carney had "sealed his reputation as the boy who cried wolf". Savers should, he said, be prepared for a longer than anticipated period of very low rates.
Peak curtains?
We’ve heard of peak oil, but what about peak curtains?
That was the rather odd vision conjured up by a senior executive of Ikea last week as he outlined his belief that consumers in the western world already have way too much "stuff", a trend he dubbed "peak curtains".
Speaking at an environmental conference last week, Ikea's head of sustainability, Steve Howard, said: "If we look on a global basis, in the West we have probably hit peak stuff. We talk about peak oil. I'd say we've hit peak red meat, peak sugar, peak stuff . . . peak home furnishings."
Ikea is already the world’s largest furniture group and has plans to double its 2011 global sales total of €25 billion by the end of the decade. An admission that we’ve all already got more than we need looks pretty much like an own goal by the Swedish retailer’s green guru, along the lines of jeweller Gerald Ratner’s infamous description of one of his products as “total crap” back in 1991.
The joke fell flat for Ratner, who was eventually forced to resign as the Ratner name disappeared from the high street. But Ikea’s Howard sees no contradiction between his views on peak curtains and Ikea’s growth plans. Changes in consumption are an opportunity for companies such as Ikea to rethink they way they do business, he said.
Products could have what he called “a second life”, and he sees “an increasingly circular Ikea” where items are repaired and recycled.
He did point out that while we have more than enough stuff in the West, that's far from the case elsewhere. Ikea has plans to enter the huge market in India next year, and the subcontinent is likely to play a big part in helping the company achieve its ambitious sales targets. Offering customers "second life" products there is unlikely to be part of the expansion plan, however.
Fiona Walsh is business editor of theguardian.com
