Bank of England's Ramsden says in no hurry to raise interest rates

Posted October 18, 2017

Higher inflation also raises the chance of policymakers hiking interest rates next month, which in turn tends to strengthen a currency.

Bank of England governor Mark Carney told the Treasury Select Committee in Westminster this morning (17 October) that he expects United Kingdom inflation to peak at just more than 3 per cent, in the next two months.

According to data released by the Office for National Statistics (ONS) on Tuesday (17 October), inflation as measured by the Consumer Price Index (CPI) rose 3% year-on-year last month, compared with the 2.9% growth recorded in September and in line with analysts' expectations.

Carney made it clear that he did not think it was a good idea to build a "war chest" by raising rates a few times so they could be cut again in time for the next downturn.

He said he expects the rate to peak this month or in November at slightly more than 3 per cent, and that he and colleagues at Bank of England had expected inflation to hit 3 per cent around now.

"As a effect we faced a trade-off - and we still face a trade-off - between having inflation above target and the need to support, or the desirability of supporting, jobs and activity".

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The increase, which brings the rate to its highest level since March 2012, was widely anticipated in the markets and was largely due to rising prices for food and a range of transport costs.

"My view is that we are approaching a tipping pint at which it would be necessary or justified to remove some of that stimulus", Tenreyro said Tuesday.

BOE deputy Governor Dave Ramsden was answering United Kingdom lawmaker's questions in a parliamentary committee, alongside new external BOE policy setting member, Silvana Tenreyro.

Carney gave no further detail on when this might come, but reiterated that it was on the mind of the monetary policy committee and most members thought a raise "over the coming months may be appropriate".

'We believe the ability of the Bank of England to enter a rate rising cycle is severely limited by the slowing growth we are seeing in the UK.

The Bank of England is making plans for a "hard" Brexit, he noted, but was still hoping for a transitional deal.