LONDON (Reuters) - Bank of England Deputy Governor Jon Cunliffe said on Thursday it was not clear that interest rates needed to rise soon, showing at least two of the central bank’s nine policymakers are unlikely to vote for a hike in November.
Cunliffe told BBC radio he did not see signs of sustained upward inflation pressure.
On Tuesday, one his new colleagues Dave Ramsden said he was not part of the majority of BoE rate-setters who thought that a rate hike was likely to be needed in the coming months.
Another member of the Monetary Policy Committee, Silvana Tenreyro, said on Tuesday her support for that position was “very contingent on the data”.
Cunliffe said the British economy was growing and unemployment was falling. “But we are not seeing pay pressure and for me we are not seeing sustained signs of domestic inflation pressure,” he said in an interview on BBC Radio Wales.
“The inflation we have is coming from abroad from that depreciation (of sterling after the Brexit vote).”
Sterling extended losses against the U.S. dollar after Cunliffe’s comments.
He said the Bank’s August forecasts were for economic growth to continue over the next three years and for pay to start to increase over the period, putting upward domestic pressure on inflation.
“If that forecast - it was our best assessment in August - came to pass, I am very clear interest rates will need to rise slowly and gradually over the period. When that process should actually start, I think, is a more open question,” he said.
Britain’s economy has slowed this year, hurt by the rise in inflation since the 2016 Brexit vote and uncertainty about the country’s future trading ties with the European Union.
Even so, the Bank said last month that most of its rate-setters expected to increase borrowing costs in the coming months, partly because Brexit would lead to higher inflation.
As of Thursday’s close in British fixed income markets, investors were pricing in a roughly 80 percent chance that a first 25 basis-point hike will come on Nov. 2, after the Bank’s next policy meeting.
Most economists polled by Reuters last month said they expected a rate hike in November, but a majority also said it would be a mistake to raise borrowing costs at this time.
George Buckley, an economist with Nomura bank, said on Thursday he had surveyed 80 of its clients. Forty-two percent said a BoE hike now would probably be a mistake, against 58 percent who thought it would not.
Reporting by Andy Bruce, editing by William Schomberg