World Bank issues warnings on interest rates and inflation

After better than expected growth in the global economy, Bank says financial markets are vulnerable to unforeseen negative news

Financial markets are complacent about the risks of sharply higher interest rates that could be triggered by better than expected growth in the global economy this year, the World Bank has warned.

The Washington-based organisation said that much of the rich west was running at full capacity as a result of a broad-based upswing in activity, but were now vulnerable to a period of rising inflation that would prompt action from central banks.

Inflation is when prices rise. Deflation is the opposite - price decreases over time - but inflation is far more common.

Lenders have already bumped up the cost of fixed rate mortgages ahead of the Bank of England's decision to raise base rate from 0.25% to 0.5%, and mortgage borrowers on tracker and variable rates will see their monthly payments become more expensive in the coming days. "

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