Bank of England likely to introduce 'modest' rate rises, says McCafferty
Interest rate-setter Ian McCafferty has stopped short of pledging continued support for a rate hike, but said the Bank of England will likely introduce "modest" rises over the next two years.
Mr McCafferty - who was among three members on the Monetary Policy Committee (MPC) to vote for a rise from 0.25% to 0.5% in June - told LBC radio that if economic conditions stay steady, it is likely that the Bank will start to tighten monetary policy in the mid-term.
"If the economy evolves along the lines of the forecast that we put out in May we would expect to see a couple of modest rate rises at some stage over the next couple of years or so.
"That's what's built into the market curves on which the forecast is based. But exactly when the committee decides (to hike rates) on a month-to-month basis is difficult to say."
Mr McCafferty was among two other MPC members - including Kirsten Forbes and Michael Saunders - who voted for a rise to 0.5% at the Bank's June meeting, marking the first time three members have dissented for more than six years.
But the MPC member was hesitant to say whether he would continue pushing for a rate hike over the coming months.
"I will make my decision about that at the next meeting on the basis of the data that by then will be available ... we're all watching the data and will see how it goes."
The Bank's chief economist Andy Haldane signalled support for a hike last month, saying that he could be convinced to vote for a rise by year-end if the economy shows signs of strength.
It comes despite dovish comments by Governor Mark Carney who in June stressed that "now is not yet the time to begin that adjustment", while wages continue to stagnate and the impact of Brexit on the economy is unclear.
But Mr McCafferty said dissent amongst the MPC should not come as a surprise.
"Economics is not an absolute science - there is no absolute right answer and therefore, having a committee in which you have nine experts but with an independent opinion each allows you for some differences of interpretation of the data and understanding of what's going on."
However, the rate-setter said he still expects interest rates to remain relatively low compared to the years leading up to the financial crisis, when the bank rate stood at 5%.
"There are good underlying reasons why interest rates will remain a lot lower than that, but at the same time we're currently at a quarter of a percentage point in terms of the bank rate - that's actually keeping the foot on the accelerator in terms of stimulus to the economy and we may need to take a little bit of that away."