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MPC member says prepare for rate rise

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An influential member of the Bank of England’s Monetary Policy Committee has signalled he believes the time has come to consider increasing interest rates.

In an interview with the Financial Times, Martin Weale argued strong wage growth and low unemployment will need a response from the central bank, even if low oil prices continue to hold down inflation.

He told the newspaper he and one other MPC member almost voted for a rate rise at this month’s meeting.

He said: “If you’d asked me last autumn how rapidly I thought wages might pick up, looking at the most recent numbers, the movement seems to have been a bit faster than that.

“Recently, it seems that rather than [wage increases] fizzling out, the labour market … is fizzing away nicely”.

Weale said the slump in the oil price gave some “breathing space” around the timing of a rise, but this was now coming to an end.

He said next month would be too early for any increase, given the uncertainties around whether Greece will stay in the eurozone and the upcoming Budget on 8 July.

But he added: “If you were not to change policy rates because of what might happen, then you would end up not changing them. And … not changing rates ever would have worse effects than adjusting interest rates to fit the economic circumstances.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Rt Hon Sir Arthur Streeb-Greebling 24th June 2015 at 9:18 am

    An ‘influential’ member? I do hope they are all ‘influential’. If you predict something enough times, you are sure to be on the money at some point aren’t you?

  2. Steven Pearman 24th June 2015 at 9:30 am

    Another headline grabber who thinks his opinion is more valid than the majority.

  3. The longer the first rise gets left, the worse it’s going to be eventually. Something needs to be done to wake up the public to the onward challenges. These include, actually being able to remortgage if they need to – lengthy low rates have created a false sense of security. Kicking the can down the road eventually gets you into trouble and ‘Forward Guidance’ has been the biggest crock of you know what of all. Smoke and mirrors…

    • You do understand that its the market that sets the rates, especially on the long end of the curve? Central banks are always playing catch up to the market rate, whether on the way down or on the way up. We have one more leg down in this 35 year cycle, 10 year gilt yield to sub 1%, then all hell breaks loose when the bond bubble bursts. Most investors, and their advisers, will lose fortunes.

  4. So while the £ sterling has broken the 1.40 to the € barrier this ‘influential’ member proposes driving it even higher, thus making the UK less competitive to it’s major trading partner!
    Good move, that might reverse the decline in unemployment which should stop the ‘little people’ earning more!!! Is he for real?
    Would echo Streeb-Greebling and Steven Pearmans comments as well.

  5. Big deal. How much will the rise be 0.5%? Hardly anything to get excited about. I guess we have a long wait until we get back to something decent like 5%?

  6. whatever you think of him (as a headline grabber) personally I think his analysis is correct.

    The £ is currently doing well against the Euro because of all the uncertainty around Greece. if/when that finally resolves itself the £ will depreciate again.

  7. Christine Brightwell 24th June 2015 at 1:03 pm

    But there an awful lot of people who are not feeling this wonderful fizzing labour market and have not has a pay rise for years – and are still not likely to get one. If the fragrant Mr Osborne decides to reduce (even if only in real terms by not increasing) the support for those in work there will be even more pressure on those who cannot support it.

    Its easy to look at the pretty flowers and forget about all of the bits underneath that struggle to survive.

  8. @Christine Brightwell.

    It is precisely the nonsense of support for those in work which is the problem. That’s why about 2/3 of jobs created since 2008 have been part time. Working 16 hours a week is not work – it is playing. Part timers now make up 27% of the workforce – and all on benefits. There are 4 times as many part timers as there are unemployed. So are you surprised to know that our productivity per head is abysmal. In the 7 most advanced economies we have the worst record. In France (yes France for heavens sake) the comparative productivity gap is 27% !!

    It is the very benefits system that is encouraging this laziness. And boy what a cost! A pay rise? For crap productivity? What planet are you on?

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