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Thursday, March 31, 2011

Interest rate zombies

The thought of a rise in interest rates to hold off inflation are perceived to be unlikely when the British property market is drenched with 'Zombie households' (great term).

Ian Spreadbury, a Fidelity fund manager talking at Fidelity Funds Network investment debate said the BoE was unlikely to adjust its current monetary policy to tackle inflation because of the spectre of "zombie households".

"People are at the edge of what they can afford to pay right now and even modest increases in the base rate could see a catastrophic fall in house prices.

"The UK economy is incredibly sensitive to rate rises. I would be very surprised if in a years time rates were any higher than one to 1.5 per cent more."

Read more in FT Advisor

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