Bank of England’s McCafferty Says Time For Rate Rise Getting Nearer

The time for the Bank of England to start raising interest rates is getting closer, and economic data over the next few months will help determine exactly when that will be, a senior Bank of England policymaker said on Friday.

Ian McCafferty, a member of the Monetary Policy Committee who last year was in a minority calling for rate rises, said economic conditions were again getting nearer to warranting a rise in interest rates from their record-low 0.5 percent.

“With some of the headwinds to the economy … now starting to fade, we are approaching the time when monetary policy will need to begin its journey back to more ‘normal’ settings,” McCafferty said.

Sterling rebounded from a day’s low against the dollar GBP= after the BoE published the comments, which McCafferty made at a conference for economics teachers on Thursday.

Most economists polled by Reuters do not expect interest rates to rise until early next year.

McCafferty said he would be taking a particularly close look at measures such as unemployment and wage growth, and that he expected inflation to be back at its 2 percent target by the end of 2017 and to overshoot it thereafter.

“The timing of the first rate rise will depend critically on the signals contained in the economic data over the coming months,” McCafferty said, according to a text of remarks he made at a BoE conference for economics teachers on Thursday.

McCafferty dropped his vote for higher rates at the start of this year, as tumbling oil prices pushed British inflation far below its 2 percent target.


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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.