Inflation needs to be checked with rate increase, says MPC member

Outgoing external rate-setter says Bank of England policymakers are wrong in assessment of economic conditions

A Bank of England policymaker has heaped further pressure on Mark Carney, the governor, with a warning that the central bank’s policymakers have failed to spot an inflationary spiral that needs to be choked off with an immediate increase in interest rates.

In the same week that Andy Haldane, the chief economist, said he was considering voting for an increase in rates before the end of the year, Kristin Forbes, an outgoing member of the monetary policy committee, used her valedictory speech to say the governor and a majority of the other MPC rate-setters were wrong to believe inflation would peak soon and then retreat, allowing rates to stay low.

Speaking at the London Business School, the US academic said: “This is not an economy that is too weak to support an increase in interest rates. Instead, it appears to be an economy that is ‘overstimulated’ and where monetary policy has been set too loosely,” she said.

Forbes, one of four external members of the MPC, has voted at the past three committee meetings for an increase in the base rate from 0.25%. She said internal Bank research showed inflation would persist while the economy was “clearly outperforming” by every measure except wages growth.

At the most recent meeting, she was joined by fellow external members Michael Saunders and Ian McCafferty in voting for rates to be increased.


Phillip Inman

The GuardianTramp

Related Content

Article image
Bank of England must be wary of interest rate rise, says chief economist
Andy Haldane says UK at risk of sharp slowdown as BoE weighs up conflicting forces of inflation from weak pound and the Brexit vote denting confidence

Katie Allen

02, Dec, 2016 @2:37 PM

Article image
Bank of England rift as chief economist ponders interest rate rise
Andy Haldane reveals he seriously considered opposing governor Mark Carney in MPC vote earlier this month

Larry Elliott Economics editor

21, Jun, 2017 @11:09 AM

Article image
Pound leaps as Carney says growth will be factor in interest rate debate
Any change to rates would be linked to economic activity and Brexit outcomes, but Bank governor says still ‘too early’ to make that call

Larry Elliott

28, Jun, 2017 @3:15 PM

Article image
Bank of England's Michael Saunders: 'Prepare for higher interest rates'
The MPC member on why he voted for a rise – and why policymakers should not hold fire during Brexit talks

Katie Allen and Larry Elliott

04, Jul, 2017 @7:34 PM

Article image
UK ‘has 50% chance of slipping into recession within 18 months'
NIESR calls for interest rate cut and QE as it warns of 320,000 job losses in latest grim assessment of shrinking economy

Sean Farrell

02, Aug, 2016 @11:01 PM

Article image
Bank of England plays down prospect of interest rate cut
Three members of monetary policy committee give statements suggesting they see no sign of underlying deflationary pressure

Larry Elliott Economics editor

25, Mar, 2015 @8:44 PM

Article image
Bank of England decision to keep 0.5% interest rate was unanimous
All members of monetary policy committee rejected rate rise after previously split votes while analysts say likely coalition negotiations will delay changes

Heather Stewart

22, Apr, 2015 @11:32 AM

Article image
Bank of England meeting could discuss cutting interest rates
A recent run of bad news on the economy may have chipped away at Mark Carney and other policymakers’ certainty on the path for interest rates

Katie Allen

08, May, 2016 @12:41 PM

Article image
Bank of England’s Andy Haldane warns of inflation rises
Departing chief economist says central bank could be forced to stop economy from overheating

Richard Partington Economics correspondent

30, Jun, 2021 @11:00 PM

Article image
Rising food and fuel prices hoist UK inflation rate to 2.3%
Standard of living fears build as wage growth slows and inflation leaps from 1.8% in January to highest level since September 2013

Katie Allen

21, Mar, 2017 @11:27 AM