Bank of England chief economist Andrew Haldane: There's "no rush" to raise interest rates

Jessica Morris
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The Bank of England is in "no rush" to raise its main interest rate (Source: Getty)

The Bank of England is in "no rush" to raise interest rates, and eventual increases will be by small increments, according to the central bank's chief economist Andy Haldane.

"We are in no rush to raise rates, the recovery is taking hold nicely," Haldane told the Daily Post. "The last thing we want to do is knock the stuffing out of that."

Nonetheless, he recognised that the bank's main interest rate, which has been held at historic lows for nearly six years, will have to rise eventually.

"They won't stay like that forever, but when that rise comes it is going to be very gradual," he said. "It could be half a percent a year for several years."

Threadneedle street had previously held off an interest rate hike due to a lack of growth in real wages. However, there had been two dissidents, with Martin Weale and Ian McCafferty continually voting to raise rates since early last year.

While wage growth has finally returned, record low inflation is proving another headache for policymakers, with Weale and McCafferty actually voting to hold rates at the bank's last monetary policy committee meeting.

A new normal?

In good news for borrowers, and bad for savers, Haldane said relatively low interest rates could be the "new normal." This will be around two, three or four percent, which is below the pre-crisis average of around five per cent.

"People might be fearful that we could go back to the sorts of levels we saw in the 80s or 90s which were four, five, six, seven per cent rates," he said.

"We are clear that even when we are through this adjustment and rates are starting to rise we don't really see rates getting back to those levels," he said. "Maybe the new normal for rates might be two per cent, or three per cent, or maybe four per cent."

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