BoE Member Says Even Gradual Interest Rate Rise Can Lead to Faster Borrowing Costs Hike

Britain needs to start raising interest rates sooner rather than later if it wants to avoid sharp and painful increases in the future, a member of the Bank of England’s rate-setting committee has warned

In an interview with the Financial Times, Martin Weale, an external member of the BoE’s Monetary Policy Committee, said he thought even a “gradual” rise in interest rates could see borrowing costs rise by up to one percentage point a year – faster than markets are expecting.

Mr Weale said his definition of a “gradual” rate rise would involve the bank tightening by “no more than” 25 basis points a quarter, while investors are betting on an increase of about 1.8 percentage points over three years.
The central bank has repeatedly said rate rises will be “gradual and limited” when the economy becomes strong enough to make them necessary. But Mr Weale warned that if the MPC wanted the pace to be gradual it should not wait too long before making a start.

via CNBC

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Alfonso Esparza

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.
Alfonso Esparza