UK to see return of ultra-low interest rates, IMF says
Ultra-low interest rates are set to return with inflation due to tumble in the near future, according to the International Monetary Fund (IMF).
This will be welcome news to homeowners, many of whom have recently been hit with a steep rise in mortgage costs.
The United Nations financial agency says that the combination of an ageing population and low productivity is set to rein in inflation and take interest rates back to pre-COVID levels.
Skyrocketing inflation, currently at a four-decade high in Britain, is only a hiccup in the overall trend for low interest rates, rather than a permanent change to the global financial landscape, the IMF said.
“Recent increases in real interest rates are likely to be temporary. When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels,” a report by IMF economists concluded.
The IMF analysis found that the “natural” rate of interest had not been changed by the pandemic.
The so-called “natural” rates of interest, an anchor for monetary policy that neither stimulates nor discourages economic activity, “will remain low in advanced economies or decline further in emerging markets,” the report concluded.
If accurate, that means less fiscal pressure as governments will be able to borrow more cheaply.
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But it would mean central banks, particularly in developed countries, may again have to rely on bond buying and other strategies to cut policy interest rates.
Some economists have argued the pandemic shifted the natural rate of interest higher, reversing forces like globalisation that helped keep borrowing costs low and also driving up government debts to historic levels.
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The Bank of England has released documents revealing a slight increase in UK’s GDP in Q2 of 2023, contrary to its earlier predictions of a technical recession.
The IMF said it is possible things have changed, and noted that the impact of developments like the transition to a less carbon-intensive economy remain to be seen.
However, the fund said its analysis suggests that the current high rates “are likely to be temporary”.
Once rates normalise to prior low levels, a deep enough recession may force central banks “to resort to the same strategies they employed in the decade before the pandemic, such as balance sheet policy and forward guidance”.
Paedophile Lostprophets singer Ian Watkins has died after being attacked in prison.
Watkins, 48, was serving a 29-year jail term for multiple sexual offences, including serious crimes against young children and babies at HMP Wakefield, in West Yorkshire.
He was attacked with a knife by another inmate on Saturday morning, sources have confirmed.
West Yorkshire Police said two men, aged 25 and 43, have been arrested on suspicion of murder.
A police van outside Wakefield prison. Pic: YappApp
Watkins was pronounced dead at the scene after prison staff reported the assault to police.
The prison went into lockdown in the immediate aftermath of the incident, sources added.
A Prison Service spokesperson said they could not comment while the police investigate.
Watkins was previously stabbed in an incident at the same prison in 2023, suffering non life-threatening injuries after he was reportedly taken hostage by three other inmates before being freed by prison officers six hours later.
He was sentenced in December 2013 to 29 years in prison, with a further six years on licence, after admitting 13 sex offences, including the attempted rape of a fan’s baby.
Watkins performing in 2004. Pic: PA
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He also encouraged a second fan to abuse her child during a webcam chat and secretly stashed child sexual abuse videos, some of which he had made himself.
At the time, police described him as a “committed, organised paedophile”.
Having found fame in Welsh rock band Lostprophets, Watkins was arrested after his Pontypridd home was searched on orders of a drug warrant in September 2012.
A large number of computers, mobile phones and storage devices were seized during the search.
When sentenced at Cardiff Crown Court, the singer was told he was being given an extended sentence – and a judge said his crimes “plumbed new depths of depravity”.
After being caught with a mobile phone behind bars in 2019, he told a court that he was locked up with “murderers, mass murderers, rapists, paedophiles, serial killers – the worst of the worst”.
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