Belfast Telegraph

Interest rates may have chance of rising marginally, says Bank of England figure

The UK economy is in "a little bit" of a better position to shoulder an interest rate rise, according to a Bank of England policymaker.

Ben Broadbent, the Bank's deputy governor, said "there may be some possibility" for interest rates to move marginally higher, as he stressed that borrowing costs could rise more times than the financial markets expect.

It comes after the Bank's Monetary Policy Committee (MPC) voted 6-2 to keep interest rates at a record low of 0.25% on Thursday.

In an interview with the BBC, Mr Broadbent said: "The MPC said given the other assumptions in its forecast it thought probably there would need to be rate rises, and indeed more rate rises than those priced into the interest rate curve in the future than the financial markets expect."

"I do think the time is likely to come when rates will go up generally."

In its quarterly inflation report, the Bank cut its forecasts for growth to 1.7% in 2017 and 1.6% in 2018 from 1.9% and 1.7% predicted in May. It maintained its forecast for growth of 1.8% in 2019.

Financial markets are pencilling in two rate rises over the next few years, though the Bank said on Thursday that borrowing costs may need to rise by more than the City is predicting.

Mr Broadbent said the Brexit vote had caused inflation to march higher and there had to be a "trade off between stabilising inflation and keeping the economy going".

The cost of living had reached a a near four-year high of 2.9% in May, before unexpectedly falling to 2.6% in June.

Households have seen their spending power come under sustained pressure from lacklustre wage growth and higher inflation, leading to an expansion of credit and a decline in savings.

Credit rating agency Moody's said on Monday that Britain's soaring debt levels are leaving the nation's lowest earners dangerously exposed to an economic downturn.

Alex Brazier, the Bank's executive director of financial stability, has also warned that high street banks are edging towards a "spiral of complacency" when it came to consumer lending.

Mr Broadbent said: "The level of consumer credit is less compared to incomes than it was during the (financial crisis).

"It is absolutely right that the prudential side of the Bank... should be concerned about pockets of debt that are growing very, very quickly.

"The MPC does not think this is a first-order macro issue for the economy".

Popular

From Belfast Telegraph