BoE Deputy Skeptic About Rate Hike

BoE Deputy Skeptic About Rate Hike

BoE Deputy Skeptic About Rate Hike

If it had risen any further, Bank of England Governor Mark Carney would have to write to Treasury chief Philip Hammond explaining why inflation is more than a percentage point above the 2% target and what he and his colleagues at the central bank were going to do about it.

"The Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 2.8% in September 2017, up from 2.7% in August 2017; it was the last higher in March 2012", the ONS said. The sterling was lower against the USA dollar near midday on Tuesday after Ramsden's comments, trading at $1.1765.

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.

Britain's inflation rate hit 3 percent in September, above the BoE's 2 percent target, data published on Tuesday showed.

The Bank's new deputy governor, Dave Ramsden, distanced himself from more hawkish MPC members by saying he was not close to voting for a hike.

And Tenreyro, who is an economics professor at the London School of Economics, said: "My view is that we are approaching a tipping point at which it would be necessary or justified to remove some of that stimulus".

The BoE surprised investors last month when it said most of its rate-setters expected to increase borrowing costs "in the coming months", even though Britain's economy is growing more slowly than other European economies and uncertainties about Brexit are mounting.

Speaking before the Treasury Select Committee one of the MPC's newest members, Professor Silvana Tenreyro, said that while in the immediate aftermath of the European Union referendum the trade deficit had increased, the gap between imports and exports was now closing.

"Meanwhile, our pay packets have stagnated with wage growth falling behind inflation, despite United Kingdom unemployment being at a record low". This will make it hard for the Bank to make any sustained move to raise rates in the short to medium term, ' said Sweeney. The ongoing effect from past weakness in sterling is likely to continue exerting upward pressure on inflation, noted Lloyds Bank in a research report.

Andrew Sentance, senior economic adviser at PWC, said: "This latest rise in inflation will add to the squeeze on the spending power of consumers and is likely to prolong the period..."

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