Bank of England base rate will have to rise

Sir Mervyn King, the outgoing governor of the Bank of England, has warned that interest rates have to increase. Speaking at the Lord Mayor's Banquet, he explained that extraordinary monetary policies could not continue indefinitely and real interest rates are at unsustainably low levels. He said: “There is an understandable yearning for a return to normality.” He went on to say: “A rapid return to higher interest rates would do great damage to the balance sheets of highly indebted households, companies and, especially, financial institutions. The challenge in returning to normality is not so much managing market expectations when that eventually happens, important though that is, but in creating the economic conditions in which it is sensible to return to more normal levels of interest rates.” June 21, 2013