To raise or not to raise interest rates?

The current economic outlook in the UK as well as global market conditions justify a policy rate of 0.5 per cent. In fact, if we are looking at the international environment for policy rate “hints”, financial volatility rather than the federal funds rate is the variable to keep an eye on. Starting with small and carefully implemented Monetary Policy Committee (MPC) decisions, the policy rate will probably settle to around 2.8%, which is much lower than the 5% policy rate commonly observed prior to the financial crisis. Costas Milas explains.