THE rise in interest rates should be only temporary. City economist Roger Nightingale said that it was more likely to be a cyclical blip as opposed to a secular trend.

Mr Nightingale was guest speaker at a money markets seminar hosted by Royal London Asset Management and held at the Old Government House Hotel.

‘Short term, interest rates will go up because the Bank of England says they will, and you can rely on them,’ he said.

‘The question is how high they go and what effect that has on the economy.’

An independent consultant for 20 years, his clients include British Airways, the Singapore Government and others in the US, Japan and Hong Kong.

Interest rates had been generally low since reaching their peak in 1979-80; since then there had been only the occasional blip, he said.

‘Unemployment is low and going down, inflation is low and still going down.

‘The government’s borrowing is high, but not as high as that in other countries and the balance of payments is in deficit, but not to a serious extent.’

But the level of consumer debt was growing so quickly that there was a risk of things going wrong and this was causing the Bank of England to pre-impose a rise in the rates.

‘The risk is that they will slow the growth of credit down so much as to cause an economic setback and unemployment to rise, as was the case three or four years ago.

‘Raising interest rates too early and cutting them too late risks throwing your economy into long-term recession.’

Mr Nightingale’s talk revolved around the machinations of the Bank of England’s Monetary Policy Committee and how the UK’s interest rate policy was formulated.

Royal London Asset Management CI managing director Pierre Paul that said his company constantly monitored interest rates so as to optimise the placement of clients’ money.

‘It’s an active process and we are always dealing and managing our clients’ money and Roger is one of a handful of our much-needed advisers,’ he said.

RLAM set up its Guernsey business in 1988 to offer a money-management service to mainly institutional clients.

Mr Paul said that this coincided with the growth of the captive insurance industry, which formed the company’s main client base.

‘Our business model is based on providing an excellent service by focusing on only one type of investment – cash,’ he said.

‘Many people don’t even consider cash as a proper investment but we can demonstrate that we can improve the return on cash without additional risk by using liquid money-market instruments instead of bank deposits.’

Cash did not suffer the volatility associated with stocks and shares and accordingly the business has seen steady growth over past years.

It continues to thrive and is looking to expand into Jersey, the Isle of Man and Gibraltar.