Bank of England’s Weale adds voice to unease over market rate view
LONDON – Bank of England policymaker Martin Weale has said he would be surprised if Britain’s central bank took as long to hike interest rates as markets expect.
Weale’s comments, in a newspaper interview published on Friday, add to signs of unease among BoE policymakers about markets pricing in an interest rate hike only by mid-2019, a view described as unwarranted by Deputy Governor Jon Cunliffe a day earlier.
“I would be surprised if people had to wait as long as markets are currently implying … but markets well may well turn out to be right,” Weale told the Irish News on a visit to Northern Ireland.
BoE officials rarely comment on market expectations of interest rates, although there have been exceptions, such as BoE Governor Mark Carney’s 2014 Mansion House speech when he said a rate hike could come “sooner than markets expect”.
Markets now point to a chance the Bank could cut interest rates from their present record low of 0.5 percent, despite Carney saying two weeks ago that all Monetary Policy Committee (MPC) members believe the next move will be a hike.
Weale, the MPC’s longest-serving member, is due to step down in July.
He said inflation had been pushed down in part by sterling’s appreciation over the past couple of years, although the currency has weakened in the last couple of months.
“That (the pound’s strength) is not an effect that is going to last forever,” he said.
Weale, one of only two current members of the nine-strong MPC to have voted for higher rates in the last few years, said the central bank would have to wait longer than it had previously expected for inflation to return to its 2 percent target.
“If we look at core measures of inflation, those are closer to the target but still below the target,” he added. He described wage pressure as a key issue for the MPC, adding members were keen to find out how much businesses think the low inflation rate is dragging on wage settlements.
British wage growth slowed in the final three months of 2015, according to official data on Wednesday, and most surveys show little sign of a significant rebound coming soon. Economists polled by Reuters expect the Bank to raise interest rates around the end of this year. -Reuters