Outgoing Bank of England deputy governor Sir Charlie Bean says interest rates could return to 5 per cent “within the longer term”.
Speaking with Sky News, Bean – who steps down today – says interest rates could rise towards the 5 per cent mark, which he says is traditionally considered “neutral”.
He says: “I would not want to say it will be back there in ten years, but it might be reasonable to think that, in that very long term, you would go back to 5 per cent, but it is probably quite a long way down the road.”
Bank governor Mark Carney last week told the BBC that 2.5 per cent is likely to become the “new normal” level for base rate by 2017; a forecast Bean says is “sensible.”
Two weeks ago Carney warned in a speech at Mansion House that a rise in interest rates could come “sooner than expected” as the Bank seeks to set monetary policy to meet its inflation target while using up spare capacity.
The outgoing deputy governor also remarked that economists were “not sufficiently cognisant of the risks building up” in the run up to the financial crisis.
He concluded by stating the UK economy was more resilient now than when he arrived in the role in 2000.