Weale: Hike rates or risk inflation surge

Tim Wallace
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THE BANK of England should increase interest rates now because the economy is growing rapidly and inflationary pressures are threatening, policymaker Martin Weale said last night.

If interest rates stay too long for too low, inflation may surge upwards and so interest rates could have to be hiked more sharply than planned, he indicated.

“The margin of spare capacity is shrinking rapidly and all logic suggests that that ought to lead to an increase in inflationary pressures over the two to three year horizon which concerns the MPC,” Weale said, referring to the very rapid falls in unemployment over the past year.

If wage and price inflation starts to kick in, the Bank’s plan to raise rates very gradually may have to be abandoned.

Weale is one of the two members of the monetary policy committee who has been voting to increase rates to 0.75 per cent.

Meanwhile economists at UBS pushed their interest rate hike prediction back form November 2014 to August 2015.

The analysts believe the UK economy is slowing a touch, indicating there is less need to tighten monetary policy this year.

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