One Million Pounds

Increased wages will cause interest rates to rise sharply next year, according to a Treasury survey of City economists.

The Treasury released a report on Wednesday containing economic forecasts by City financial specialists including Santander and Citigroup, with some experts expecting the rate to more than triple to 1.75%.

Higher rates would mean good news for pensioners and savers, who will get more out of their savings, but would land a significant amount of younger families in debt troubles.

The Bank of England has kept rates at 0.5 per cent to maintain an emergency stimulus to the weak economy, but Governor Mark Carney previously refused to rule out a rise in interest rates before next May’s general election.

However, wages continue to grow, rising by 1.7 per cent this February, while official figures showed on Wednesday that inflation fell for the sixth month in succession to 1.6 per cent.

With the UK economy expected to grow faster than any other G7 nation this year, experts say that it’s likely the Bank will be forced to act sooner than they may have initially forecast.

Photo by Bank of England