Two more hikes in rates needed – BOE
The Bank of England’s deputy governor has flagged that two more interest rate hikes may be needed to lower inflation the day after the Bank increased rates for the first time in a decade.
Amid inflation at 3 per cent, Ben Broadbent said: “Currently we anticipate we will need maybe a couple of more rate rises to get inflation back on track, while at the same time supporting the economy.”
His comments came after the Bank increased base rates from 0.25 to 0.5 per cent on Thursday – the first monetary tightening since July 2007, and reversing the cut seen in the aftermath of last year’s Brexit vote shock in 2016.
The central bank also signalled more “gradual” increases are on the way to cool surging inflation.
Broadbent, speaking on BBC Radio’s Today programme also said that the European Union referendum vote had slowed the UK’S economic performance.
“It is clearly having some effects on the economy. We think investment is weaker than it would otherwise have been,” he said.
“Obviouslyconsumptionhas been affected significantly by the squeeze on real incomes that results from last year’s referendum.”
Sterling firmed a little in the forex markets yesterday, up nearly a third of 1 per cent against the US dollar and the euro.
This came after the pound slid 1 per cent against those currencies in the immediate aftermath of Thursday’s rate rise because of the accompanying dovish comments from BOE governor Mark Carney.