Dr Muhammad Ali Nasir discusses possible interest rates hike
On 13 June, Associate Professor in Economics Dr Muhammad Ali Nasir was quoted in an article for the Express on the impact of US inflation figures on UK inflation rates.
The article, titled ‘Warning more pain to hit homeowners as BoE awaits Fed's interest rates move’, discusses the likelihood of an interest rate hike in the UK following the decision by the Federal Reserve on interest rates in the US which is expected on 14 June.
Dr Nasir states that despite the expectation of a hike, the Federal Reserve’s decision on interest rates is highly dependent on US inflation figures which have fallen rapidly in recent months; therefore a hike may not be guaranteed. Dr Nasir goes on to say that a pause may in fact be necessary to avoid ‘undershooting’ the inflation target of 2%.
Furthermore, as the Bank of England prepares for the US’s decision, Dr Nasir notes that a pause or even a decrease on US interest rates would be beneficial to the global economy;
Whenever the US increases the rates, it can have implications for the rest of the world and other central banks have to increase the rates which hurts the real economy - firms, households - as the cost of borrowing goes up.
With inflation in the UK currently much higher than the US, Dr Nasir adds that a hike in US interest rates would raise questions about the UK’s own stance on inflation and its lack of aggressive action in combating the rise.