Business
British inflation pressures could
Updated : Mar 19, 2018, 06:22 AM IST
British inflation pressures could pick up quickly and other factors could also mean an interest
rate hike is needed "in the near future" but the Bank of England is right to keep rates on hold
for now, a BoE policy maker said.
Kristin Forbes said in a speech on Tuesday that the risks from a return of inflation, asset price
bubbles in the financial sector and levels of consumption and savings were "moderate and manageable"
at the moment.
"All of these trends merit close attention," she said. "Any could factor into a case to tighten
monetary policy in the near future. But they do not currently appear to be generating a sufficient
cost to merit a change in interest rates today."
The BoE's nine rate-setters all voted to keep rates at their record low of 0.5% at their January
and February meetings.
Two policymakers, Martin Weale and Ian McCafferty, had voted to raise rates in the last five monthly
meetings of the Monetary Policy Committee of 2014, but changed their minds after oil prices pushed
Britain's inflation rate to near zero.
In her speech, Forbes said it might sound silly to ask if rates needed to go up with inflation touching
0.3 percent in January.
However, the external factors which have pushed inflation down -- such as the plunge on oil and food
prices and the strengthening of sterling -- would fade quickly, she said.
Forbes said there were risks that inflation could prove stronger or weaker than expected.
"The bottom line however, is that the current policy of near-zero interest rates does not yet appear
to be generating incipient inflationary pressures that could not be addressed in a timely fashion as
needed," she said.