Bank of England official hits back at Theresa May over low interest rates

Helen Cahill
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UK National Debt Hits 1 Trillion
Gertjan Vlieghe is an external member of the Monetary Policy Committee (Source: Getty)

Bank of England rate setter Gertjan Vlieghe has retaliated against Prime Minister Theresa May's complaint about low interest rates.

May has criticised the "bad side effects" of the Bank's policy, saying in her address at the Conservative party conference that "people with savings have found themselves poorer".

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Speaking at Sheffield University, Vlieghe has said her comments reflect a partial view of the position of savers.

He said only one seventh of the £10 trillion in wealth owned in the UK is constituted of bank deposits.

Half of the wealth held by UK residents is in property, and the rest is pension rights, stocks and shares, which benefit from low interest rates.

Vlieghe said: "This is likely to benefit the vast majority of savers by far more than the loss of interest income on the £1.5 trillion of deposits."

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Few households have their entire wealth entirely in bank deposits, he added, suggesting that most people will have benefited from the bank's policy to some extent.

“Jobs and wage growth have benefited savers as well as borrowers,” he said. “Once the effect of an improved economy on savers is taken into account, it seems to me that most savers benefit from monetary stimulus.”

The Monetary Policy Committee member also defended the Bank of England against accusations that its low interest rates had hit the wider economy by increasing the accounting value of the deficits of defined benefit pension schemes. He said there was no evidence of firms cutting investment due to these deficits.

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