Prepare for interest rates rise: Inflation could mean hike, says Bank of England economist
BRITISH households could see higher interest rates in the coming months, as policymakers try to rein in the surging cost of living, the Bank of England's chief economist said.
Andy Haldane: UK citizens feel ‘frustrated and squeezed’ at pay
Inflation has surged past the Bank's target of two per cent and there should now be "serious" consideration over raising interest rates, according to Andy Haldane.
The top economist appears to preparing households for a rate rise, which increases borrowing costs but also means better returns on savings.
Higher interest rates helps to keep inflation from rising drastically, which squeezes family budgets when wage growth is not keeping pace.
The member of the rate-setting Monetary Policy Committee (MPC) recently hinted that he is likely to vote for a hike in the second half of the year, after the cost of living hit a four-year high of 2.9 per cent in May.
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Mr Haldane told BBC Wales: "We need to look seriously at the possibility of raising interest rates to keep the lidon those cost of living increases."
He added: "For now we are happy with where the rates are.
"We need to be vigilant for what happens next."
Interest rates are currently at just 0.25 per cent, after they were cut last August following the outcome of the UK referendum.
But strong economic growth following the Brexit vote and higher inflation have raised calls for interest rates to rise.
At the most recent MPC meeting, three out of eight members were in favour for an immediate hike to 0.5 per cent.
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Mark Carney warns time is not right for interest rate rise
It's now thought Mr Haldane could switch his vote from a hold to rise at the next rate-setting meeting in August.
Even Mr Haldane's boss Mark Carney appears to have changed his stance towards interest rates in recent days.
The Bank of England Governor this week admitted that tolerance for high inflation among the MPC was disappearing.
After the outcome of the election and the start of Brexit talks, the Bank chief previously said now is not the time for rates to rise.
Outgoing MPC member Kristin Forbes this month warned that failing to raise interest rates now, could mean steeper hikes further down the line.
Increased expectation of higher interest rates have boosted the pound.
