Interest rates likely to fall to pre-Covid levels, IMF predicts

Interest rates successful large economies are expected to autumn to pre-pandemic levels due to the fact that of debased productivity and ageing populations, according to a forecast.

The International Monetary Fund (IMF) said increases successful borrowing costs are apt to beryllium "temporary" erstwhile precocious ostentation is brought nether control.

The Bank of England has been raising involvement rates since December 2021, taking them from 0.1% to 4.25%.

This has raised owe payments for galore homeowners.

Central banks successful the UK, the US, Europe and different nations person been lifting involvement rates to combat the complaint of terms rises, different known arsenic inflation.

In the UK, ostentation is astatine its highest for astir 40 years due to the fact that of rising vigor prices and soaring nutrient costs. A fig of factors are fuelling inflation, including Russia's penetration of Ukraine which has helped thrust up vigor costs.

The IMF said that "recent increases successful existent involvement rates are apt to beryllium temporary".

It said: "When ostentation is brought backmost nether control, precocious economies' cardinal banks are apt to easiness monetary argumentation and bring existent involvement rates backmost towards pre-pandemic levels."

The Washington-based fiscal instauration said debased productivity arsenic good arsenic ageing populations volition enactment arsenic an anchor to inflation.

Explaining wherefore older radical impact inflation, George Godber, money manager astatine Polar Capital, said that they thin to walk less.

"The magnitude that you walk comparative to your income is highest erstwhile you're successful your 20s, 30s and 40s - often that's possibly young families, erstwhile you've got households forming, you've got couples coming together, they thin to walk the astir erstwhile they decorate and bargain a car oregon whatever, and you arsenic you get older successful beingness you dilatory down your consumption," helium said.

"There's little heading to Glastonbury and nights retired connected the town, there's much sitting astatine location and watching the Antiques Roadshow truthful so your spending patterns benignant of trim and you prevention much and truthful an ageing colonisation tends to beryllium disinflationary."

Just anterior to the Covid pandemic, the UK's involvement complaint was 0.75% but the Bank of England chopped it doubly successful March 2020 to 0.1% arsenic the state entered lockdown.