Bank of England Deputy Governor Charles Bean, who steps down from his position on Monday, has underlined current policy thinking on the Monetary Policy Committee, saying he expects them to rise to around 2.5 or 3% over the medium term.
In an interview aired on Sky News Sunday, when asked if rates are likely to return to 2.5 or 3% over the next five years, Bean said, “I think those are reasonable number.”
The comments echoed those from Governor Mark Carney in a radio interview Friday and comments in the weekend press from the Bank’s other Deputy Governor Jon Cunliffe. Both said that rates would likely rise around the turn of the year, but would likely peak at a “new normal” around 2.5%.
However, Bean did look for higher rates further out, as he added it may well be that rates return to levels around 5% ten years from now.
“I wouldn’t want to say rates will be back there in 10 years, but I think its plausible over the very long run, if you want to call it that, that these headwinds will abate,” he said.
“It might well be reasonable to think that in the very long term you will go back to 5% but it probably quite a long way down the road,” he added.
Bean also noted it was right for markets to expect rates to rise around the turn of the year.
Bean retires from the Bank on Monday and for many it is seen as the end of the era. Once he goes, there will be no MPC members who have ever sat on a monthly meeting that had voted to change interest rates.