Overcast

Overcast

max temp: 14°C

min temp: 9°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

The vandals tore through Bury St Edmunds

A drunken “night of madness” saw vandals rack up over £5,000 of damage to cars, pubs and property as they roamed the streets of Bury St Edmunds.

Josephine Murphy

An 86-year-old woman who had gone missing from Clacton has been found safe and well

Aftermath of a barn fire in Holton.

A television antiques expert has appealed for help rebuilding his eco-friendly arts centre in Suffolk after a major blaze destroyed the historic sawmill that was to be its showroom and workshops.

Tim Yeo

An outgoing Suffolk MP has denied reports he stands to make more than £500,000 from the sale of his second home, which was part-subsidised by the taxpayer – saying he plans to keep the London property.

Stansted Airport

Aircraft pilots were targeted with lasers around Stansted Airport 45 times last year.

Darsham Nurseries head chef Lola DeMille and chef Tom Eagle in the cafe where they are donating money from one of the dishes to the World Land Trust.

An international conservation charity based in Suffolk is one of three organisations to benefit from a new campaign raising awareness about the impact of meat production on health, welfare and the environment.

Suffolk County Council's base at Endeavour House

Up to 23 jobs could go in a major shake-up of Suffolk County Council’s education services.

Latitude Festival, at the Henham Estate near Southwold

Suffolk poet Luke Wright has seen the Latitude festival grow from a modest boutique gathering in 2006 to one of Britain’s biggest music and arts events.

Last year's Colchester Half Marathon.

Thousands of people will be pounding the streets of Colchester tomorrow as the town’s half marathon event returns.

.The Patrick Stead Hospital, Halesworth.
Photo: Nick Butcher
Copy: Sarah Brealey
For: EDP / Weeklies
EDP pics © 2007
(01603) 772434

Community leaders and concerned patients have raised fears for the future of a Suffolk hospital.

Most read

Most commented

Topic pages