This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.theguardian.com/business/2015/jul/14/bank-of-england-policymaker-says-case-for-raising-interest-rates-is-building
The article has changed 3 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| Bank of England policymaker says case for raising interest rates is building | Bank of England policymaker says case for raising interest rates is building |
| (about 4 hours later) | |
| The time is nearing to raise interest rates in the UK and waiting too long will mean having to increase them more sharply in the end, departing Bank of England policymaker David Miles has said. | The time is nearing to raise interest rates in the UK and waiting too long will mean having to increase them more sharply in the end, departing Bank of England policymaker David Miles has said. |
| In his final speech as an external member of the Bank committee that sets interest rates, Miles also warned investors against looking to other central banks’ moves for clues as to how UK policymakers will act. | In his final speech as an external member of the Bank committee that sets interest rates, Miles also warned investors against looking to other central banks’ moves for clues as to how UK policymakers will act. |
| As investors position for interest rates to start rising in the major economies after years of ultra-loose policy ushered in by the financial crisis, many have looked to the US Federal Reserve to take a lead. But Miles dismissed this approach. | As investors position for interest rates to start rising in the major economies after years of ultra-loose policy ushered in by the financial crisis, many have looked to the US Federal Reserve to take a lead. But Miles dismissed this approach. |
| “One thing the monetary policy committee [MPC] will not do, and never has, is just follow another big central bank; it is a daft idea that we cannot raise rates in the UK before the US and also cannot be long behind them,” Miles said in a speech to the Resolution Foundation thinktank on Tuesday. | “One thing the monetary policy committee [MPC] will not do, and never has, is just follow another big central bank; it is a daft idea that we cannot raise rates in the UK before the US and also cannot be long behind them,” Miles said in a speech to the Resolution Foundation thinktank on Tuesday. |
| Citing low unemployment, wage rises, solid economic growth and improving confidence among consumers and businesses, Miles echoed earlier remarks by the Bank’s governor, Mark Carney, and said the time to start taking rates back to more normal levels was “soon”. Miles also implied interest rates could be around 3% in two years or so to keep growth and inflation on track. | Citing low unemployment, wage rises, solid economic growth and improving confidence among consumers and businesses, Miles echoed earlier remarks by the Bank’s governor, Mark Carney, and said the time to start taking rates back to more normal levels was “soon”. Miles also implied interest rates could be around 3% in two years or so to keep growth and inflation on track. |
| “Now is closer to the right time to start a gentle amble back towards a more normal setting for monetary policy,” Miles said. | “Now is closer to the right time to start a gentle amble back towards a more normal setting for monetary policy,” Miles said. |
| The economist joined the MPC in June 2009 after the Bank had already slashed interest rates to the current record low of 0.5%. Miles has not once voted for a move in either direction in interest rates in more than 70 policy meetings at the Bank, although the voting from the latest July meeting is not yet public and he has one more vote to go in August. | The economist joined the MPC in June 2009 after the Bank had already slashed interest rates to the current record low of 0.5%. Miles has not once voted for a move in either direction in interest rates in more than 70 policy meetings at the Bank, although the voting from the latest July meeting is not yet public and he has one more vote to go in August. |
| Related: Interest rate hike is moving closer, Bank of England governor tells MPs | Related: Interest rate hike is moving closer, Bank of England governor tells MPs |
| The remarks in Miles’s speech suggest he could yet vote for a rise. “The case for beginning a gradual normalisation in the stance of monetary policy is stronger than at any time since I joined the committee over six years ago,” he said. | |
| “Waiting too long to start on a path back to a more sustainable rate is a bad mistake. What you really need to avoid is sharp rises in interest rates. The cost of raising interest rate sharply is particularly high in the UK, where a large proportion of household debt is in the form of variable interest rate mortgages and where many people would struggle to adjust to sudden and significant rises in monthly payments. | “Waiting too long to start on a path back to a more sustainable rate is a bad mistake. What you really need to avoid is sharp rises in interest rates. The cost of raising interest rate sharply is particularly high in the UK, where a large proportion of household debt is in the form of variable interest rate mortgages and where many people would struggle to adjust to sudden and significant rises in monthly payments. |
| “Given that, and given that many of the after-effects of the mess of 2008 do seem to have faded (for example, the drying up of bank credit), I think a first move up in Bank rate soon is likely to be right.” | “Given that, and given that many of the after-effects of the mess of 2008 do seem to have faded (for example, the drying up of bank credit), I think a first move up in Bank rate soon is likely to be right.” |
| He appeared to rebut comments by the Bank’s chief economist, Andy Haldane, that lifting rates too soon risks being self-defeating and tipping the UK back into recession. | He appeared to rebut comments by the Bank’s chief economist, Andy Haldane, that lifting rates too soon risks being self-defeating and tipping the UK back into recession. |
| “I do not attach great weight to the idea that starting this process will create great risks of dropping back into very weak growth, falling into negative inflation and engendering a splurge in risk-avoiding behaviour,” said Miles. | “I do not attach great weight to the idea that starting this process will create great risks of dropping back into very weak growth, falling into negative inflation and engendering a splurge in risk-avoiding behaviour,” said Miles. |
| “I attach more weight to the risks of waiting too long and then not being able to take a gradual path to a more normal stance for monetary policy.” | “I attach more weight to the risks of waiting too long and then not being able to take a gradual path to a more normal stance for monetary policy.” |
| Miles has often been characterised as a dove for not voting for higher rates nor expressing concern over loose policy. But he dismissed such labels as “pish-posh”. | Miles has often been characterised as a dove for not voting for higher rates nor expressing concern over loose policy. But he dismissed such labels as “pish-posh”. |
| “The hawk/dove labels are pretty silly because they suggest some unchanging genetic tendency towards favouring one type of policy; anyone who was like that would be very ill suited to be on the MPC,” he said. | “The hawk/dove labels are pretty silly because they suggest some unchanging genetic tendency towards favouring one type of policy; anyone who was like that would be very ill suited to be on the MPC,” he said. |
| Miles’s comments on interest rates closely mirrored Carney’s remarks earlier on Tuesday that “the point at which interest rates may begin to rise is moving closer”. | Miles’s comments on interest rates closely mirrored Carney’s remarks earlier on Tuesday that “the point at which interest rates may begin to rise is moving closer”. |
| Those comments lifted the pound against the dollar and the euro as investors adjusted their positions to factor in the chances of a rate rise before the end of this year. | Those comments lifted the pound against the dollar and the euro as investors adjusted their positions to factor in the chances of a rate rise before the end of this year. |