UK in better shape for a rate rise, says Bank deputy
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.
The Bank’s Monetary Policy Committee voted 6-2 to keep interest rates at a record low of 0.25pc 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 1.7pc in 2017 and 1.6pc in 2018 from the 1.9pc and 1.7pc predicted in May.
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 reached a near four-year high of 2.9pc in May, before unexpectedly falling to 2.6pc in June.
Households have seen their spending power come under pressure, leading to an expansion of credit. Rating agency Moody’s has said 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 comes to consumer lending.