Bank of England says UK rate rise needed ‘soon’

A Bank of England policymaker said UK interest rates need to rise “relatively soon” as wages pick up, adding to signs that support is gradually building for the first increase in British borrowing costs since before the financial crisis.

Martin Weale, one of the bank’s rate-setters, also said a rise would give the central bank scope to cut if the British economy runs into trouble in the future.

“With wage growth remaining firm, the tightening labour market means that inflation is likely to rise above target in two to three years’ time,” Weale wrote in Scotland on Sunday.

“Policy needs to be set with reference to this, rather than the current rate of inflation. As a result, it seems likely to me that the bank rate will need to rise relatively soon.”

Bank of England maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at £375 billion…

— Bank of England (@bankofengland) September 10, 2015

Britain’s economy has grown strongly over the past two years and, despite recent signs of a slight slowdown, the bank is expected to start raising rates in 2016, probably following the US Federal Reserve which could move as soon as this week.

So far this year, Weale has remained part of the overwhelming majority of Monetary Policy Committee members who have voted to keep rates at their record low of 0.5%.

But he is seen by economists as the most likely candidate to join Ian McCafferty who was the lone proponent of a rate hike at the BoE’s policy meetings in August and September.