Monetary policy committee member David Miles says he is likely to vote to increase interest rates before leaving the committee next May.
Writing in The Telegraph, the former Morgan Stanley banker said the UK economy had recently begun to see signs of a sustained recovery and likened the raising of base rate to “scaling back the emergency medicine as the patient begins their recovery.”
Miles says: “Having the rate at 0.5 per cent is obviously not a normal or sustainable setting for monetary policy. We have had such low rates because the economy took a huge hit in the aftermath of the crisis of 2008.”
He notes spare capacity in the economy, such as low wages, means an immediate rise is not required and that he expects to vote for an increase before May 2015 when he leaves the committee.
He says: “There is still slack in the economy so the stimulus given by very low interest rates is not something that is required right now.”
The MPC member also says any increases will be gradual and the rate will likely be lower than the 5 per cent average over the 10 years before the crisis.
Miles adds: “The level of base rate to which we might get at the end of a period of gradual normalisation is likely to be lower than the rate consistent with inflation being at target before the financial crisis.”