Rate rises must work for savers, not just banks

Tomorrow the Federal Reserve will announce to Wall Street its decision on interest rates (AP Photo/John Minchillo, file) (AP)

Today it was the turn of the Swedish Riksbank to turn the screw on borrowers and businesses with a full percentage point rise in interest rates.

Tomorrow, the US Federal Reserve may well follow suit in what would be, of course, a far more significant move.

It all makes a fascinating backdrop for Andrew Bailey and his fellow Monetary Policy Committee members when they convene this week ahead of their delayed decision on rates on Thursday.

With 100 basis point bumps increasingly the “new normal”, the odds of the MPC going beyond a half point are shortening. The markets are now pricing in two full percentage points by Christmas, which would take the Bank of England’s benchmark rate to 3.75%.

Savers will be celebrating the end of their 17 years of misery with rates finally rising off the floor — although still far behind the cost of living.

At least they should be celebrating. But billions of pounds of cash is still marooned in “legacy” accounts with interest rates barely above zero.

One of Britain’s most powerful banking bosses, NatWest CEO Alison Rose, was today speaking of how higher rates benefit banks. Good for them. But there will be trouble if that good fortune is not swiftly passed on to the millions of savers who have seen the value of their nest eggs shrivel.

That will only accelerate the decline of the high street dinosaurs as nimbler rivals sniff their opportunity.

@JonPrynn