The most likely path for monetary policy shows the first rate hike will come in spring next year, Bank of England Monetary Policy Committee member Martin Weale tells Sky News.
Money markets are currently pricing in a first hike in March/April 2015 and the BOE’s Quarterly Inflation Report showed on market rate assumptions that inflation settles just below its 2% target. Weale says it is very helpful of the MPC to set out this likely rate path.
“I think it is very helpful that we try and explain the most likely path of interest rates is that the first rise will come, perhaps, in the spring of next year and then the path is likely to be gradual,” Weale says.
The Weale comments were released by Sky News, which plans to show more of the interview with the policymaker later.
The UK general election is set for May 2015, so a spring hike next year would come when campaigning is underway.
“During an election campaign it would obviously be difficult (to up Bank Rate) but the election campaign will last for three weeks,” Weale said.
The MPC, on past precedent, will delay its May meeting so it does not clash with the election vote.
Weale also told Sky News that if earnings growth was faster than expected he could not rule out an earlier rate hike.
The MPC member also restated his belief that UK house prices are very elevated at present and that this worried him.
Weale also defended the BOE’s quantitative easing program, saying it had been good for the economy and helped limit rises in unemployment.