Abbey International still sees higher savings rates as a possibility

Following the Bank of England’s decision to leave UK Base Rate unchanged for September, Abbey International said that it feels a further rise in UK interest rates could still be possible this year, if the risks for inflation remain on the upside.

Anthony Haynes, Managing Director, Abbey International comments, “Of considerable significance is the official Inflation Report, which tells us how the future pressures on inflation are perceived. A strong economy will suggest a continued upwards pressure on inflation, whereas a slowing of economic activity, accompanied by further falls in the rate of headline inflation, will suggest the need for further rises may be receding.”

In August, the Bank of England’s Monetary Policy Committee voted unanimously to leave UK Base rate at 5.75%, suggesting a cautious wait and see approach. Consumer Price Inflation, the banks key target, unexpectedly fell below the 2% target in July , but the Committee felt that the short-term economic outlook was still one of uncertainty, as future seasonal pressures could easily rekindle inflationary pressures.

Haynes continues, “The danger from inflation is still there, as evidenced by the fact that other measures of inflation, such as the Retail Price Index, are still at high levels. We are still probably in a situation where the unknowns are driving speculation, so we must wait for more hard data on the economy, particularly given the recent turbulence in the market which has confused both interest rate and inflation trends still further.”

Commenting on the outlook for savers offshore, Jane Matthews, Head of Marketing & Business Development at Abbey International said “High UK Base Rates are good news for our savings customers, particularly those in our Base Rate Tracker accounts, where rates will move upwards automatically by the full amount of any increase in UK Base Rate within two days of any change.”

Abbey International has just launched Issue 7 of its popular Base Rate Tracker term account, paying 6.05% on deposits of £10,000 and over.

For further information on offshore, visit abbeyinternational.com.