Partly Cloudy

Partly Cloudy

max temp: 18°C

min temp: 11°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

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.

shares

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.

shares

0 comments

A computer-generated image of how the Sizewell complex will look after construction of Sizewell C.

Development of Sizewell C took a huge step forward today as the companies were announced that will build its sister nuclear power station in Somerset.

Gary Allen, operations manager,  with Diane Allen and Graham Allen at Ipswich-based Ajax Domestic Spares which is celebratiing 40 years in business.

Ajax Domestic Spares has marked 40 years in business in style by launching a new showroom in Foxhall Road, Ipswich.

The Willis building in Ipswich.

Around 200 people are to lose their jobs at the Ipswich office of global insurance broker and risk management group Willis.

The Great House restaurant with rooms in Lavenham.

An award-winning Suffolk restaurant has gained another accolade after being ranked the 26th best in the country.

Gavin Patterson, chief executive of BT.

Photo: BT

BT is to pay out up to £129million to extend the Government-led roll-out of superfast broadband, after a bigger-than-expected take-up of the service.

Centrica has reignited controversy over high energy bills by announcing a 44% increase in first half profits at its British Gas retail division.

Energy giants Royal Dutch Shell and Centrica today revealed plans to axe a total of more than 12,000 jobs.

Christopher Hayman of Hayman Distillers with his children Miranda and James.

Essex gin maker Hayman Distillers is celebrating after winning a Gold award at this year’s International Wine and Spirits Competition (IWSC).

Bakery chain Greggs saw like-for-like sales rise 5.9% in the six months to July 4.

Higher breakfast sales and a bigger range of healthier products helped Greggs grow underlying profits by 51% in the first half of the year.

Barclays chairman 

John McFarlane.
Photo: VisMedia

Barclays boss John McFarlane today signalled plans to ramp up growth, squeeze costs and streamline the business after announcing a 25% rise in first half profits.

Uncertainty over Government policy is holding back potential investment in the offshore wind sector, according to East of England Energy Zone director James Gray.

The absence of a clear Government stategy is leaving the offshore wind industry “in limbo”, according to a leading figure within the sector in East Anglia.

Most read

Most commented

Topic pages