LONDON (Reuters) - The Bank of England does not have a crystal ball to know where to set interest rates to sustain Britain’s economic recovery, but they will remain low for some time to come, a top Bank official said on Thursday.
Spencer Dale, chief economist at the BoE and a member of its Monetary Policy Committee, said he expected continued strong growth in Britain’s economy this year but that a rise in productivity will be needed to secure the recovery.
“We don’t have a crystal ball, so I don’t know what will happen with interest rates,” he told BBC radio.
“We’ve been very clear what we’ve been trying to do when setting monetary policy - to sustain the recovery, try to use up some of the spare capacity, get unemployment down, and keep inflation close to target.”
But he said he did not know exactly what would be needed with interest rates.
“We need to have a degree of humility - the last few years have told us we can’t forecast the economy really well,” he said.
Dale also said there was a risk that economic growth in the first quarter could turn out marginally weaker because of bad weather and flooding across England, and that history showed how easily the housing market could overheat:
“A healthy housing market can go to a hot housing market very quickly, so our job is to worry, and we’re watching it very carefully.”
On Wednesday, the BoE said British interest rates could start to rise from record lows in little more than a year as a rapid recovery brings the economy closer to operating at full steam.
Reporting by Andy Bruce