Departing Bank of England rate-setter takes swipe at Mark Carney in final speech
A departing rate-setter at the Bank of England has taken a final swipe at dovish Governor Mark Carney, saying record-low interest rates are no longer justified.
In her final speech as an external member of the Monetary Policy Committee (MPC), Kristin Forbes questioned the continued need for "emergency" level interest rates, as well as the "substantial amount of stimulus" rolled out in the wake of the Brexit vote, stressing that forecasts for a recession and higher unemployment after the referendum have failed to materialise.
"The 'lift-off' of UK interest rates should not be delayed any longer.
"Many of the factors that have justified keeping interest rates at emergency levels over the past few years have become less potent, and sterling's depreciation has fundamentally shifted underlying inflation dynamics in a way that makes it more pressing to begin this voyage soon," she said in a speech to the London Business School on Thursday.
Ms Forbes, whose term ends on June 30, has been a hawkish voice among more dovish members of the MPC including Mr Carney, who earlier this week argued against raising interest rates from their record low of 0.25%.
The Governor made note of continued uncertainty, saying 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.
However, Ms Forbes said economic risks like those surrounding Brexit only make the case for a "limited and gradual" adjustment, and drive home the need to make monetary policy "more nimble".
She also highlighted that interest rates have actually fallen since she joined the MPC in 2014 - a time when the Bank was widely expected to be one of the first to vote for a rise in the wake of the financial crisis.
"We should be less hesitant to adjust interest rates - in either direction - as the situation changes," she said.
"Engineers are quick to adjust a launch date if there is a technical concern or if the weather shifts. We should do the same.
"Otherwise, the UK economy may face greater challenges than parents face when their 30-something fails to launch from their home."
Ms Forbes was among two other MPC members including Ian McCafferty 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.
While the hawks remain outnumbered, the Bank's chief economist Andy Haldane joined the chorus this week, saying that he could be convinced to vote for a rise by year-end if the economy shows signs of strength.
Ms Forbes said: "Although I have been voting to increase Bank Rate in the UK since March, and two of my colleagues on the MPC... also voted to increase Bank Rate last week, a majority on the MPC does not support reversing a small portion of last August's stimulus."
She added: "Each member has valid arguments supporting their votes each month, but when taken together, the outcome is quite a change from the series of rate hikes that I had expected to occur over the last three years."