Bank should be a bit more activist, says rate rise proponent

THE economy is likely to hold up despite uncertainty about Brexit and the Bank of England might need to get “a bit more activist” by raising interest rates, one of the two Bank policymakers who voted last week for a rate rise said yesterday.

Striking a more upbeat tone about the economy than the latest message from the Bank as a whole, Michael Saunders said that a recent fall in the unemployment rate to its lowest since the 1970s meant wages and inflation might be about to rise more strongly.

“The test will come going forward,” he said in the Evening Standard newspaper. “The amount of spare capacity is much less now than in the past few years. So it follows from that it would be normal for the response of policy, if growth surprises on the upside, to be a bit more activist than it has been.”

The Bank cut interest rates to 0.25pc in August last year. Mr Saunders said the economy would probably grow more slowly in the coming years: “Maybe it might grow five percentage points less over the next 15 years. That’s a fairly sizeable economic loss. But that’s over a long period of time.”