City: rates must rise in Autumn at latest
VOICE OF THE CITY
THE Bank of England’s monetary policy committee (MPC) should raise interest rates by early autumn at the latest, according to members of the City A.M./PoliticsHome Voice of the City panel.
Fifty-three per cent of panellists said the MPC should hike rates by September at the latest.
Over a third (34 per cent) said they should be hiked at this week’s meeting of the committee. Six per cent favoured a rate rise in July; five per cent in August; and nine per cent in September.
Three per cent of panellists said the MPC should wait until winter before hiking rates.
However, there were still a significant number of doves on the panel. Twenty-nine per cent thought the MPC should wait until 2012 while a further nine per cent said the committee should put off a rate rise until beyond 2012.
Although more than a third think the Bank should hike rates this week, no member of the panel thinks it will actually do so, suggesting the MPC is out of touch with the City.
Most panellists (56 per cent) think the Bank will either raise rates this winter on in 2012.
Even most of the dovish members of the panel think high inflation has hurt the British economy. An overwhelming majority (88 per cent) said above target inflation had been “damaging”.
A slender majority (51 per cent) thought the MPC, chaired by Bank governor Mervyn King (pictured) had not taken sufficient account of the need to control inflation when making decisions on interest rates.
“The MPC and, therefore, the Bank of England, is risking its reputation and future reliability on long-term low interest rates,” said one panellist.
Another added: “The Bank of England has a target but it is ignoring it. In so doing it is now acting just as politicians did when they were in control and defeating the object of an independent rate setter.”
However, another panellist countered: “I think the Bank of England is on the right track. Most of the factors leading to high inflation are outside its control so raising interest rates now would cause further pain to companies and consumers without having a material impact on the inflation rate.”
• City A.M. and PoliticsHome interviewed 420 members of the Voice of the City panel by email last week.
The panel has been specially recruited to represent a cross section of London’s financial and business community.
Members of the panel that respond to at least 80 per cent of surveys between now and September will be entered into a prize draw to win a luxury weekend in Paris. Full Ts&Cs available on request. New members can apply to join at cityam.com/panel