Weale warned that if rates are left on hold for too long then rises may need to be bigger and more painful when the decision to take action is made. He added that when asking the question of where rates should be, he is less certain than six months ago and noted that the UK economy has seen rapid growth in demand.
Any question of an imminent rise, before we reach late 2014, was dismissed however with Weale saying the bank can wait for ‘a bit longer’ and the situation is not urgent.
Ian McCafferty, another committee member has also publicly noted that action should not be delayed too long if the rise is to be sufficiently gradual when it comes.
The overall consensus being largely priced into markets at this point is for a rate rise sometime in the first half of 2015, however these comments add weight to the arguments of those who consider it being possibly a 2014 event. The rate has been at the present 0.5% level since 2009.
Weale’s ‘sooner than later’ comment seems to run against the recent sentiments of Bank of England governor Mark Carney however. Carney recently played down the prospect of a rate rise by saying that the UK economy was only beginning to normalise after the fall out from the financial crisis.
Carney has also said the heat in the housing market is the biggest risk to the UK economy but appeared to argue that its ‘structural problems’ need to be solved through house building rather than monetary policy.
The comments from Weale continue a theme of ambiguity as to where the MPC as a whole stands on timing for a rate raise. The minutes from the last meeting of the committee revealed that there were a variety of views amongst the committee members and the decision has become more balanced than at the start of the year.
The comments by Weale may be of concern to the CBI who last month warned that rises should not be on the cards at this stage as it believes growth is still not back to normal and there are a number of political risks, such as the upcoming UK general election.
