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Bank of England divide deepens over interest rates

The gap is widening between those on the MPC who back record low interest rates and QE and those who think the economy does not need the extra stimulus

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Division within the Bank of England on raising interest rates still shows no sign of healing, recent interviews with policymakers suggest.

Monetary policy committee member Michael Saunders argues the central bank should raise rates, according to the Times.

Saunders says the Bank is pushing the economy too hard with rates of 0.25 per cent and £375bn of quantitative easing.

Fellow MPC member Ian McCafferty agrees with Saunders, and both voted for a rise to 0.50 per cent at last month’s vote on interest rate levels.

But MPC member Gertjan Vlieghe is still in favour of keeping rates as they are, according to a recent interview.

He told The Independent: “This is an environment where a premature hike would be a bigger mistake than one that turns out to be slightly late.

“I think the consumption slowdown is here, it’s not over. I don’t think there’s going to be a sufficient offset from investment and net exports to compensate for that.”

Bank of England chief economist Andy Haldane says he may back higher rates, while governor Mark Carney has also hinted that a rise is needed.

The MPC will vote on whether or not to increase interest rates next week.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Gerrem up – you know it makes sense.

    1. It will put a brake on the relentless build up of debt.
    2. At long last it may encourage some saving
    3. It will (again at long last) reward the prudent.
    4. It will further help to cool the housing market.

    • 5. It will put a brake on rising depreciating-sterling-led inflation
      6. It will leave some room for manoever when the inevitable stock market correction kicks off the next recession.

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