LONDON — Michael Saunders, a Bank of England Monetary Policy Committee member, struck a hawkish tone on Friday, hinting that an interest rate hike could come sooner rather than later in a speech on Friday.
Speaking to the Federation of Small Businesses, Saunders — often considered to be one of the more dovish MPC members — said that it is “natural” for monetary policy responds to any change in economic outlook, strongly hinting that he could be ready to vote for an interest rate rise at the bank’s next MPC meeting.
“I do not believe the MPC is necessarily obliged to delay any policy moves until we have certainty over the exact shape of Brexit and its long-run effects on the economy. We make our decisions from meeting to meeting, and will fulfil our remit during the Brexit process and after it,” Saunders said.
“Overall, I suspect that the next year or two will see steady growth, above-target inflation, stronger exports, and a pickup in business investment. And there are no signs so far that productivity trends are weakening,” Saunders
Saunders strongly caveated his comments, saying: “I am not going to announce today how I will vote at the May meeting.”
“I am not a big fan of using code words or language to signal or pre-announce policy decisions before they have been made.”
The bank currently maintains a neutral stance on rates — meaning it has no bias toward cutting or hiking — having done so since late last year, around three months after cutting interest rates from 0.5% to 0.25%, and boosted its QE programme in August 2016, as a means to protect the UK from the coming economic shock of Brexit.
However, hints have become stronger and stronger in recent months that a rate hike back to 0.5% — where the base rate stood for close to seven years post-financial crisis — could be on its way.
Earlier this week, analysts at Morgan Stanley suggested that Britain’s coming general election could accelerate that process, noting that “combination of greater political stability, from a larger Parliamentary majority, and easier fiscal policy, should be positive for growth.” That, economists Jacob Nell and Melanie Baker, argue could push the MPC to hike.
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