David Roberts, head of fixed income and portfolio manager at the group said the Bank of England’s (BoE) governor needs to stop making excuses for keeping interest rates low.
Roberts, who manages a number of portfolios including the Kames Strategic Global Bond fund, said central bankers have backed themselves into a corner over interest rates.
Institutions such as the BoE cannot increase rates in order to tackle creeping inflation because of the immense asset bubble they have created, he said.
A decade of loose monetary policy from central banks has led to this bubble and ever-growing government deficits which, Roberts added, have left central banks seeking “any excuse to keep rates as low as possible for as long as possible”.
He added: “They have created the mother of all asset bubbles across most financial asset classes.”
Roberts said Carney’s reasoning for keeping rates low did not stack up and led to mixed messages from the BoE’s Monetary Policy Committee.
“Apparently, the main reason for not raising rates in the UK recently was because consumers would face a squeeze this year from the impact of higher inflation, all of which was attributed to a weaker sterling,” Roberts said.
“However, if Carney really worried about the squeeze on household income, firstly in part this is a situation he created and secondly, he could help reverse it by raising interest rates.
“Of secondary concern to the bank is consumer indebtedness.
“Again, a modest rate increase now can act as a brake on borrowing and curb the worst of bubble mentality excess.”
While he admitted that interest rate policy at the MPC had “moved on leaps and bounds” in the 25 years since it was made independent, he said many of the issues from the financial crisis era had begun to reappear.
He added: “Brexit and record low interest rates have now sparked renewed concerns about consumer indebtedness and a return to record house prices, and the bank, along with most central banks, now admits to being worried at the level of consumer debt.
“The last time we heard that was 2008, and we all know how that ended.”
