BoE's Vlieghe urges 'wait and see' on interest rates
Newly appointed Bank of England policymaker Gertjan Vlieghe on Tuesday signalled that he believes the central bank shouldn’t rush to raise interest rates.
In giving evidence to the Treasury Committee, Vlieghe said he sees risks to inflation currently skewed to the downside due to the possible impact of a global economic slowdown.
"There are risks to either side, but given the current low levels of inflation the risks are probably skewed to the downside," Vlieghe said.
Official data on Tuesday showed the consumer price index fell below zero in September, well under the BoE’s 2% target. The Bank last week said that it expects inflation will stay below 1% until spring 2016.
Analysts predict the Bank will raise rates in late 2016 as inflation could remain weak if China’s slowdown worsens.
Vlieghe said the Bank should "wait and see" before raising rates.
“However, unlike Bank of England chief economist Andy Haldane who has argued that there could end up being a need for the Bank of England’s next move to be to loosen monetary policy rather than tighten, Gertjan Vlieghe believes that the next move in interest rates is most likely to be up,” noted Howard Archer, chief UK and European economist at IHS Global Insight.
“So it is now clear that on the MPC that Andy Haldane and Gertjan Vlieghe are far off from voting for a rate hike while Ben Broadbent has also recently indicated that he is some way off from such a move.”
In contrast, BoE official Ian McCafferty, who testified on the same day, reiterated his stance on the need to raise interest rates in his testimony to the Treasury Committee. Last week he was the only policymaker to vote in favour of increasing rates to 0.75% from 0.50%.