Belfast Telegraph

Inflation could trigger rates hike

By Holly Williams

The Bank of England may soon need to increase interest rates to stop inflation soaring too high as UK growth continues to confound expectations, a top policymaker has warned.

Kristin Forbes, one of nine rate-setters on the bank's Monetary Policy Committee (MPC), signalled she was inching closer to voting for a rate hike after becoming increasingly "uncomfortable" with surging inflation given the economy's resilience since the Brexit vote.

During a speech in Leeds, Ms Forbes said growth had defied gloomy forecasts ahead of the EU referendum last June thanks to a "series of fortunate events" in the second half of last year that are set to keep supporting the economy.

She also claimed the UK's impressive performance since last June had made it "increasingly difficult" to justify keeping rates at the record low of 0.25%, with inflation predicted to surge close to 3% next year.

Ms Forbes said: "If the real economy remains solid and the pick-up in the nominal data continues, this could soon suggest an increase in bank rate."

Bank governor Mark Carney warned last week that there would be "twists and turns" as Britain leaves the EU, but Ms Forbes said policymakers needed to act soon to ward off the threat of runaway inflation.

She added: "I believe the MPC should be nimble and willing to quickly adjust the appropriate path for monetary policy in either direction as needed throughout this period, even if it means reversing recent adjustments to bank rate."

The Bank voted to keep rates on hold last week at 0.25%, having halved rates in August.

Belfast Telegraph