Overcast

Overcast

max temp: 7°C

min temp: 5°C

ESTD 1874 Search

Suffolk: No early rise in interest rates on the cards, says MPC member Martin Weale

06:00 24 January 2014

Martin Weale, an independent member of the Bank of England's Monetary Policy Committee.

Martin Weale, an independent member of the Bank of England's Monetary Policy Committee.

Archant

Interest rates could remain at their current historic low for some time, despite the steeper-than-expected fall in unemployment, a Bank of England policymaker has indicated during a visit to Suffolk.

Martin Weale, an independent member of the bank’s interest rate-setting Monetary Policy Committee (MPC), was speaking on the first day of a two-day visit to Suffolk to seek out the views and concerns of local businesses through a round of company visits and round-table discussions.

“The mood of the businesses I have seen so far is one of reasonable optimism and undoubted improvement,” he said. “Things have been quite a bit better in the past year and the hope, and expect, that to continue.

“They have been through difficult times and have found it difficult but my sense is that they have come through.”

Under a new policy of “Forward Guidance “ launched last summer following the arrival of Mark Carney as governor of the Bank of England, the MPC said it would not consider raising its interest rate from the current low of 0.5% until the UK unemployment rate fell to 7%.

At the time, the bank did not expect such a level to be reached until 2016 but the rate is now within touching distance of that threshold, at 7.1%, and this has sparked speculation over an early rise in interest rates.

Mr Weale, who was the only member of the MPC to vote against the policy of Forward Guidance, said yesterday that his concern that that time, with inflation having then recently approached 3%, was the risk of creating an impression that the bank was prepared to be more tolerant than previously of a prolonged period of above-target inflation.

The subsequent fall in inflation back to the 2% target level, at the same time as the rapid fall in unemployment, was very welcome but a trend he acknowledged he had not foreseen.

There have been suggestions the MPC should now lower the 7% threshold to, perhaps, 6.5%, but Mr Weale said he did not believe this would achieve the core aim of Forward Guidance, as any new threshold could also quickly be overtaken by events.

“I do not feel terribly enthusiastic about a reduction from 7% to 6.5%. The purpose of Forward Guidance was to create greater certainty.”

However, he said the MPC had been clear all along that the unemployment rate was only one of many factors which would shape any decision to raise interest rates and, with wage increases still well below inflation, there was scope for rates to remain at their current level for a while yet.

Mr Weale added that he did not believe the bank should start to unwind its programme of Quantitative Easing − under which it purchased Government debt to boost the money supply during the recession − until interest rates had returned to a more normal level, perhaps 2.5% to 3%.

This would give the MPC scope to support the economy by cutting rates should the process of selling down the asset purchase programme have an unforeseen negative impact.

Search hundreds of local jobs at Jobs24

0 comments

Becky Sebright-King, owner of Lady Bakewell Park, at the launch of Small Business Saturday 2016.

As the Christmas shopping season gets into full swing, it’s more important than ever to support our local traders.

The Octagon  in Colchester, where travel management company Gray Dawes is based.

Essex-based travel management group Gray Dawes is to double in size following the simultaneous completion of two acquisitions.

The Rev Jemma Sander-Heys pulls a pint of Lacons Christmas beer, St Nicks.
Photo: Lacons Brewery

Regional drinks supplier Lacons has hosted is annual Winter Gathering to mark the launch of St Nick’s, its craft ale brewed specially for the festive season.

Go Ape tree-top adventure. Picture: GO APE.

Outdoor adventure firm Go Ape has picked up a national award in recognition of rapid growth which has seen it expand across the country.

The SNS 2016 Offshore Energy conference at the Norfolk Showground. Simon Gray, chief executive EEEGR. Picture: DENISE BRADLEY

An international deal to reduce oil production could make the Southern North Sea (SNS) off the coast of East Anglia “a much more attractive playground” if it leads to a rise in fuel prices, says an industry leader.

Management Jobs

Show Job Lists

Most read

Most commented

Topic pages

Streetlife

Newsletter Sign Up

Sign up to the following newsletters:

MyDate24 MyPhotos24