Prof Booth thinks that the interest rates should be raised because there has been a long period of above-target inflation.

“Although inflation is falling at the moment, I don’t think it will fall substantially below target. And the risks are in fact that the economy will recover very rapidly and inflation will go above target again in two years’ time.”

Wouldn't raising interest rates pour water on the economy?

Prof Booth says it is true that some businesses and householders may struggle if interest rates rise, but that we are not talking about an immediate rise from the current levels to a level of five or six percent over the next three months.

“We are talking about a beginning of a process of normalisation. We can’t stay where we are forever. The dangers to the economy are in fact that we allow inflation to continue being above target. And then we have to have interest rates at a much higher level for a longer period of time in order to reduce inflation in the future.”

But the British economy doesn’t operate in a vacuum and there are record low interest rates in the US and Europe. Wouldn’t this idea of yours simply put the British economy at a huge disadvantage in comparison?

Markets are already beginning to anticipate a rise in interest rates, says Prof Booth. He's expecting to see a rise in the US at some point over the next year.

“The eurozone is in a rather different situation. Most of it is in dire economic straits and it should be possible over the next five or six years for the UK to operate a more normal monetary policy and achieve economic growth even if there are problems within the continental Europe.

"Whilst interest rates are obviously influenced by interest rates overseas, we can’t simply allow our policy to be dictated by the lowest level of interest rate that exists elsewhere in the world. If we are going to accept eurozone interests for the next five or ten years, we might as well join the eurozone.”

(VoR)