‘IT WOULD be foolish to pre-announce’ a date for an interest rate increase, the Bank of England’s deputy governor for monetary policy Ben Broadbent said yesterday.
His remarks yesterday followed Thursday’s announcement of the 8-1 vote of the Bank’s Monetary Policy Committee (MPC) to keep interest rates at their current historic low of 0.5%.
Broadbent said the MPC had no specific time in mind for a rise and earlier comments by governor Mark Carney had been misinterpreted as suggesting rates would increase ‘at the turn of the year’.
Speaking to Radio 5 Live’s Wake up to Money programme, Broadbent said: ‘We (the MPC) are responding to things that are essentially … unpredictable. And that means that it would not just be impossible, it would be foolish to pre-announce some fixed date of interest rate changes.’
The deputy governor said he saw no ‘urgency’ to increase interest rates at present. He added: ‘The economy clearly is recovering, but we had the most almighty financial crisis and there is still a bit of spare capacity left. There is not that much inflationary pressure at the moment, (although) we expect that to build over time.’
Broadbent concluded: ‘We’ve seen unemployment come down pretty steeply and some signs of improving productivity growth. We’ve seen a material pick-up in wage growth, not sufficient to give us any big inflationary risk. But all of that would naturally lead to the case for some normalisation of interest rates to start building.’
Chris Williamson, chief economist at research group Markit, told Today that more members of the MPC could vote to raise rates in the coming months. He warned that ‘the longer you leave raising rates, they higher they will have to go’ to keep inflation in check.
• The UK trade deficit almost doubled in June to £1.6bn, from £885m the previous month, the Office for National Statistics (ONS) said yesterday.
A deficit of £9.2bn on goods was partly offset by a £7.6bn surplus on services. Exports fell slightly, with total goods exports in June totalling £24.9bn, while goods imports rose to £34.1bn.
Lee Hopley, chief economist at manufacturing group EEF warned that ‘there are still downside risks a-plenty.’