04272017

MPC member calls for interest rates to rise

Bank of England

UK interest rates should be raised, despite risks in the economy, according to a member of the Bank of England’s rate-setting committee.

Kristin Forbes, a US academic, was the only member of the Monetary Policy Committee to vote to raise rates this month.

This was the first split between policymakers on rates since last July.

“Monetary policy should not go on hold,” Ms Forbes wrote in an opinion piece in the Daily Telegraph.

Ms Forbes, who is due to leave the Bank in June, said raising rates would lessen the risk of above-target inflation, and boost an improved outlook for unemployment and UK output.

Official data on Wednesday showed UK pay growth, adjusted for inflation, halved to just 0.7% – the lowest since October 2014.

But Ms Forbes said that recent weakness in wages growth probably reflects temporary caution about Brexit among employers.

The majority of MPC members saw signs of slowing consumer spending as one reason for caution on interest rates, but Ms Forbes said this should be seen in the context of strong levels of consumption in recent months.

“This softening … should only be moderate, due to support from resilient consumer confidence, solid house prices, low unemployment, and easy access to cheap credit,” she said.

“There are risks consumers could pull back more sharply – but these are still just risks.”

Although the UK economy faces a long list of risks including slowing growth, she said these “will continue for years” and should not deter policymakers from making “nimble” decisions.

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