BoE's Haldane to vote for rate rise in H2

Bank of England chief economist, Andy Haldane, believes that a tightening of monetary policy will be needed "relatively soon", stating that the process "would be prudent moving into the second half of the year".

Related topics:  Finance News
Rozi Jones
21st June 2017
Andy Haldane Bank of England
"I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year."

During a speech in Bradford today, Haldane argued that if policy is tightened 'too late', "this could result in a much steeper path of rate rises later on, contrary to the MPC’s collective expectation that Bank Rate would increase ‘at a gradual pace and to a limited extent’".

Haldane added that in the latest MPC meeting he felt there were "strong grounds for holding back until later in the year", due to stagnant wage growth and "some chance of a sharper than expected slowing in the economy".

He said that "both are reasons for monetary policy not to rush its fences", adding that the election has "thrown up a dust-cloud of uncertainty".

Bank of England governor Mark Carney said earlier this week that "now is not yet the time" to begin raising interest rates, himself citing mixed signals on consumer spending and business investment as well as "anaemic wage growth".

However Haldane now believes that a "partial withdrawal of the additional policy insurance the MPC put in place last year would be prudent relatively soon".

He continued: "Certainly, I think such a tightening is likely to be needed well ahead of current market expectations.

"Provided the data are still on track, I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year. As and when the MPC begins this process of normalising monetary policy, it will be a sign of the economy itself having begun to normalise. Far from being a cause for concern, starting the process of withdrawing some monetary policy insurance should serve as a signal of the MPC’s confidence in the UK economy’s resilience and in inflation returning sustainably to its 2% target."

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