Issue Of The Week: Division At The Bank

Does Britain urgently need to raise interest rates, or would it prove a disastrous misstep?.

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Britain isn’t saving enough, said Alex Brummer in the Daily Mail. The household savings ratio – which measures the amount the nation saves as a share of disposable income – fell to 1.7% in the first quarter, “taking it to the lowest level since records began in 1960”, and way below comparable economies such as the US and Germany. So why aren’t we saving? The short-term explanation is the squeeze on household spending (caused by a combination of stagnant wages and rising prices), which is also being cited as the cause of the worrying boom in unsecured personal lending. At the root of both, however, is the policy of near-zero interest rates: “the incentives are all geared to encourage us to borrow, rather than save”. Fortunately, central bankers are finally taking action. US rates are rising, and there is no