The Bank of England needs to “seriously” consider raising interest rates to stop rising inflation, according to its chief economist.
Andy Haldane said: "We need to look seriously at the possibility of raising interest rates to keep the lid on those cost of living increases.”
Haldane voted at the start of the month to keep interest rates on hold, but subsequently shocked markets by declaring a rate rise by the end of the year would likely be appropriate.
Speaking to the BBC in Barry, South Wales, he said: "For now we are happy with where the rates are, we need to be vigilant for what happens next".
In a busy week for Britain’s top policymakers the Bank’s governor, Mark Carney, yesterday acknowledged the increasing trade-off between rising inflation and weakening economic activity.
Although Carney repeated his evaluation that he would have to see business investment pick up to offset slowing consumption before raising rates, currency and bond markets nevertheless reacted strongly to his speech.
The pound rose above $1.30 against the US dollar in morning trading before stabilising at around $1.297 at the time of writing.
Meanwhile benchmark 10-year gilt yields rose above 1.24 per cent, their highest point since 24 March, as investors fearing higher interest rates dumped bonds.
Carney also spoke today on the need for investors to do more to prepare for climate change in his guise as head of the Financial Stability Board. In an interview with Bloomberg he said firms are risking a big hit to their portfolios if they do not do more to account for the effects of the climate on their assets.
Referring to the economic theory that bull markets end in large collapses, Carney said: “The risk is that people aren’t thinking about this sufficiently, and that there’s a bigger adjustment that comes – you get a climate Minsky moment where there’s much tougher regimes put in place.”