FRANKFURT (Reuters) - The Bank of England expects its next move in interest rates to be an increase not a cut despite record low inflation, Bank of England Governor Mark Carney said on Friday, underscoring his difference of view with the Bank’s chief economist.
“We’re still in a position where our message is... that the next move in interest rates is going to be up,” Carney said during a panel discussion at a Bundesbank conference in Frankfurt.
Bank of England chief economist Andy Haldane surprised investors last week when he said a recent sharp slowdown in inflation meant the bank was as likely as not to cut rates - a view that had been previously rejected by Carney.
Several other top policymakers at the Bank of England have left Haldane looking isolated in recent days.
On Friday, one of the Bank’s deputy governors, Ben Broadbent, also played down the sharp fall in inflation which touched zero in February. He said Britain was unlikely to suffer from a long bout of deflation.
In comments to The Times newspaper published later on Friday, Broadbent said it was likely that rates would rise over the next two to three years and he sought to diminish the differences between Haldane and other policymakers.
“The truth is that if Andy had felt that strongly he would’ve voted for a rate cut. What we do is we vote on interest rates today. We do not vote on them in the future,” Broadbent told the newspaper in an interview.
All nine members of the BoE’s rate-setting committee have voted to keep rates at 0.5 percent since the start of the year. Two members of the committee had voted to raise rates in the final months of last year but changed their minds after the plunge in international oil prices helped push down inflation.
Financial markets largely expect the first Bank of England rate hike to come in 2016.
Officials from the Bank are due to refrain from making public comments about the economy from Monday ahead of national elections on May 7.
Reporting by Paul Carrel; additional reporting by David Milliken in LONDON; editing by Diane Craft