BoE Policymaker Says No Urgency to Raise Rates

January 22, 2015 Share Print 0

Bank of England policymaker David Miles has argued that low inflation means there is no great urgency in returning interest rates to normal levels from their record low of 0.5%.

In a speech to the University of Edinburgh Business School, Miles, who is an independent member of the Bank’s monetary policy committee, said lower-than-expected inflation, driven by the rapid decline in oil prices over recent months, meant the committee should be in no hurry to raise borrowing costs.

“I don’t think that lower inflation than seemed likely six months ago means that more expansionary policy is now needed; but it does mean that there is no great urgency in starting the process of moving monetary policy back towards a more normal setting,” he said.

His view echoed the minutes of the MPC’s January meeting, published on Wednesday, which showed there were no votes for an interest rate rise for the first time since last August. Two hawkish members, Martin Weale and Ian McCafferty, withdrew their support for an increase.

The MPC believes there is an even chance that inflation could drop below zero in the coming months, prompting some analysts to raise fears that the economy is sliding towards damaging deflation. But Miles, an economics professor at Imperial College, London, said:

“This is a long way from the sort of deflation trap that is really worrying. This fall in inflation, rather than increasing the burden of debt in a way that can become self-reinforcing in a downwards spiral, is boosting the disposable income of households and making the burden of debt easier.”

via The Guardian

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.