Saga said that it may be counter-intuitive but small rate rises could boost growth, not hurt it and failure to start raising rates is another missed opportunity to restore confidence in its inflation-fighting credentials.
Dr. Ros Altmann, Saga Director-General, warned: “We have reached a point where I believe not raising rates is actually damaging the economy.
“Contrary to perceived wisdom keeping rates low could damage economic recovery, not help it.
“Our Surveys show that the over 50s - who are the section of the population with strong spending power - are cutting back. This will harm growth.
“They remember the stagflation of past years and how damaging it was. They fear that Bank of England policy is only worried about devaluing borrowers' debts, or helping banks to be profitable, which is damaging older people's interests.
“We have now entered a dangerous phase in our economy, where an inflation spiral that has been created by the policy of ultra low interest rates, is starting to have a negative impact on growth.
“We can no longer just assume that keeping rates low is only good news for the economy, because high inflation figures, together with these low interest rates, are causing consumers - particularly older people who have seen stagflation before - to retrench.
“Interest rates were brought down to the record low of 0.5% over 2 years ago, in order to combat what was then thought to be a likely period of 'deflation'. In the end, however, it has turned out that the policy of low rates and Quantitative Easing has weakened sterling and boosted overseas emerging economies, which has led to rising commodity prices which have in turn caused a surge in UK inflation.
“I believe that refusing to raise rates even a small amount now, in the face of such an inflation overshoot, is doing the economy more harm than good and could actually weaken growth itself.”
