Belfast Telegraph

Tuesday 30 September 2014

Does economy need life support?

David Elliott, Business Editor
David Elliott, Business Editor

Half a decade of ultra-low interest rates. That's five years, or 60 months, or 260 weeks, or 1,825 days of what a member of the Bank of England's Monetary Policy Committee last week described as "having the economy on life support".

There was no surprise that rates were kept on hold at 0.5% again this month and there shouldn't have been any surprise about the campaign outside the central bank today by a group called Save our Savers.

They're angry that returns for savers have been slashed because of the low interest rate, but aren't likely to find much sympathy, given the fact their cause doesn't exactly pull on the heart-strings.

More surprising is the fact the rest of the economy seems to be creeping back to some sort of health, although it's some way off being rude.

But if you take a look at recent jobs data, you'd be hard pushed to recognise an economy which needs a to be on life support.

The problem, it seems, is a productivity one.

While we're managing to keep unemployment at fairly respectable levels, we're not managing to boost productivity and that's a worry for policy makers.

The economy's growing, but only in a fairly anaemic way and until that changes, those campaigning savers are just going to have to put up with a shoddy return for their cash.

For the rest of us borrowers, it seems we've a year to make the most of low interest rates, because markets expect the bank to hike them in 2015.

Another year on life support for an economy which is in work but not yet fully working.

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