Interest rate rise ‘depends on economy’, says Bank of England deputy governor #TheElitePartyinJuly #IRepEntertain9jarBlog #TwitterTrendBlog via @myentertain9jar

INTEREST rates will rise unless UK productivity increases, the Bank of England’s new deputy governor said yesterday.

Nemat Shafik said interest rates cannot be the only way of dealing with a price bubble [GETTY]

Nemat Shafik told MPs the Bank is likely next month to lower its estimate of spare capacity in the economy.

The Bank is looking at the UK’s productivity gap – the amount produced per working hour here compared with other countries – as it weighs up when to raise historic low 0.5 per cent rates.

If we see improvement in productivity numbers, rates can stay lower for longer

Nemat Shafik

Ms Shafik said: “If we see improvement in productivity numbers, rates can stay lower for longer. If not we’ll be facing supply pressure and price pressures, and rates will have to go up.”

But she said raising interest rates must not be the main tool for dealing with a price bubble.