September 2015 – ENGLAND – A Bank of England policymaker has said interest rates need to rise “relatively soon”, adding to signs that support is gradually building for the first increase in British borrowing costs since before the financial crisis. Martin Weale, one of the Bank’s rate-setters, also said a rise would give the central bank scope to make cuts if the British economy runs into trouble in the future. “With wage growth remaining firm, the tightening labour market means that inflation is likely to rise above target in two to three years’ time,” Weale wrote in an article for the Scotland on Sunday newspaper. “Policy needs to be set with reference to this, rather than the current rate of inflation. As a result, it seems likely to me that the Bank Rate will need to rise relatively soon.”
Britain’s economy has grown strongly over the past two years and, despite recent signs of a slight slowdown, the Bank is expected to start raising rates in 2016, probably following the US Federal Reserve which could move as soon as this week. So far this year, Weale has remained part of the overwhelming majority of monetary policy committee (MPC) members who have voted to keep rates at their record low of 0.5%. But he is seen by economists as the most likely candidate to join Ian McCafferty, who was the lone proponent of a rate hike at the Bank’s policy meetings in August and September.
Weale and McCafferty voted for rate hikes in late 2014, before the global oil price plunge sent British inflation heading below zero. Weale hinted in June he might resume voting to raise rates because of rising wages but he has held his fire since then. Another MPC member, Kristin Forbes, said on Friday that interest rates would probably rise sooner rather than later. Bank of England governor Mark Carney has said the decision on whether to raise rates would become clearer around the turn of the year. –Guardian