LONDON (Reuters) - Bank of England Chief Economist Andy Haldane said he saw encouraging signs of pay growth and any increase in interest rates should be seen as a “good news story” for Britain’s economy, Sky News quoted him as saying on Wednesday.
Haldane also said he was among of the majority of BoE rate-setters who, at their meeting this month, felt that Britain’s first interest rate hike in a decade might be needed in the coming months.
“In the September minutes in particular, a majority of the committee - of which I am one - said that we could be nearing the point where a reduction in some degree of monetary stimulus might be warranted in the coming months,” Haldane said.
“And let’s be clear here: for me that would be a good news story. This would be interest rates getting back to normal, even if the new normal is different to the old normal,” he said.
The BoE last raised interest rates in 2007, shortly before the global financial crisis. It cut them last year after the shock Brexit vote and until recently most economists had not expected a hike until 2019.
But the central bank surprised markets this month when it said most of its policymakers thought a hike would be needed soon, if inflation pressure continued to build.
Investors and economists now think rates are likely to rise to 0.50 percent from 0.25 percent as soon as Nov. 2, at the end of the BoE’s next meeting.
Haldane told Sky that the squeeze on British living standards, caused by rising inflation and weak wage growth, was likely to ease in the coming months.
“I think the signs are more encouraging on the pay front than they have been for some little while,” he said. “Higher pay needs to be paid for... so I hope we might be nearing the end of the tunnel on both pay and productivity.”
At its last meeting, the nine-strong MPC voted 7-2 to keep rates at 0.25 percent, with Haldane siding with the majority.
But he has been seen as one of the BoE policymakers most likely to back a rate hike after he said in June that he expected to change his vote in the second half of 2017.
Writing by William Schomberg; Editing by Lisa Shumaker