Households should prepare for interest rates to rise as the Bank of England withdraws some of the emergency support it injected into the economy in the wake of last year’s Brexit vote, a top policymaker has warned.
Michael Saunders used a Guardian interview to explain why he had voted for a rate rise last month and to emphasise that it was no longer necessary for Threadneedle Street to keep its foot to the floor with record low borrowing costs.
The external member of the monetary policy committee (MPC) said the economy had confounded gloomy forecasts made in the aftermath of the referendum and he warned inflation would climb higher and stay well above the Bank’s target for longer without action.
“I think households should prepare for interest rates to go higher at some point. But if rates do go up, it will be in the context of the economy doing OK and unemployment being low and probably falling,” he said.
Speaking on the eve of the 10th anniversary of the last time the Bank raised interest rates, Saunders rebuffed suggestions that policymakers should hold fire while Brexit negotiations get underway.
“We are not constrained from adjusting interest rates during the Brexit period. There’s no sense that policy has to stay on hold just because Brexit negotiations are under way,” he said.
via The Guardian