Interest rates must rise "relatively soon" says Bank of England's Martin Weale

Lynsey Barber
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BoE man Weale expects a rate rise "relatively soon" (Source: Getty)

Interest rates will need to rise "relatively soon", Bank of England rate setter Martin Weale has said.

The hawkish member of the BoE's monetary policy committee (MPC) has said inflation is likely to rise above the central bank's two per cent inflation target "in two to three years' time", which needs to be reflected in policy now.

Weale is the second BoE official in as many days to point to a rate rise. Fellow member of the nine-strong MPC, Kristin Forbes, said on Friday rates will rise sooner rather than later, because the appreciation of sterling may be less of a drag on inflation and import prices than first thought.

Read more: Number of Britons expecting Bank of England to raise interest rates climbs to four-year high

Now Weale has said wage growth - citing Sainsbury's four per cent pay rise for workers and an increase of the National Minimum Wage as examples - and faster productivity growth signal inflation will rise, writing in the Scotland on Sunday newspaper.

"If we were to delay raising rates until the probability of a subsequent reduction seemed extremely low, we would almost certainly have waited too long, and would risk letting inflation drift significantly beyond our two per cent target," he warned, saying that the bank was in a position to reverse a rise if the economic uncertainty increased.

"Any decision to vote to change bank rate will be made on the basis of the balance of risks, but with the comfort that, if subsequent developments mean that any increase needs to be reversed, that can be done."

The MPC voted on Thursday 8-1 to hold interest rates at 0.5 per cent in September, in light of uncertainty over the impact of China's slowdown.

Weale is one of two members of the committee who have voted in favour of a rate rise in the past year, and could join the single dissenter in this month's decision, Ian McCaffrerty, next time.

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