Monetary policy committee member Minouche Shafik said rates would increase faster than implied by the market yield curve. The market yield curve currently points to the first rate hike coming at the end of 2019. Her colleague Martin Weale said he expected inflation to rise faster than in the Bank's latest forecast, which sees inflation overshooting its two per cent target over the next two years.
In an annual report submitted to MPs on the Treasury Select Committee, Bank of England official Minouche Shafik said:
I continue to believe it more likely than not that the next move in Bank Rate will be up – even if uncertainty about the behaviour of wage growth makes the timing of that move uncertain. Moreover, once that uncertainty has dissipated, I would expect the economy to warrant a path for Bank Rate that increases more quickly than that implied by the market yield curve used to condition in the February Inflation Report forecast.
But, as my experience since joining the committee has shown, one must be willing to retain flexibility to respond to surprises, which can emanate from the world economy, the domestic economy, or financial markets.
Shafik has yet to vote for a rate hike or cut since joining the monetary policy committee in 2014. In her most recent speech she said the that a lack of wage growth compared with productivity was one of the main reasons for not hiking at the moment.
Martin Weale said he expected inflation to overshoot the Bank's forecast in this month's inflation report. He said in his annual report:
While I am broadly comfortable with the MPC’s February forecast, the most likely outcome still seems to me that demand pressures will generate slightly more inflation than the forecast shows. Looking beyond the first year I see the risks to the upside. The risks I have in mind are particularly those stemming from possible profit share movements, but the effects of the tightness in the labour market may also start to show.