LONDON (Reuters) - Bank of England policymaker Gertjan Vlieghe said a rise in inflation to more than 3 percent might not prompt him to consider raising interest rates because the increase would probably be temporary, The Times newspaper reported on Friday.
Vlieghe said inflationary pressure at the moment was largely due to sterling’s depreciation since last year’s Brexit vote and the subsequent rise in import prices, rather than reflecting unexpectedly strong growth since June 2016’s referendum.
The dovish BoE member said that if the weaker pound pushed up prices faster than the BoE had estimated, inflation could hit 3.0 or 3.5 percent this year, above the Bank’s 2 percent target.
“But it would also mean it would come down faster afterwards,” Vlieghe said, adding a quick rise and fall in inflation might not have any impact on the BoE’s record-low interest rates or its massive bond-buying programme.
“If inflation is higher than expected because we think there is a general pick-up, then it is not just the exchange rate doing the work, that is absolutely something we need to respond to and I will be joining the response to that,” he said.
The BoE expects inflation - which stood at 2.3 percent in the 12 months to February - to peak at nearly 2.8 percent in the second quarter of next year.
Vlieghe is considered one of the strongest advocates for keeping interest rates low among the BoE’s policymakers. He voted in July last year to cut rates, a month before the rest of his peers decided to lower Bank Rate to 0.25 percent.
Last week, fellow Monetary Policy Committee member, Kristin Forbes, voted to raise rates back to 0.50 percent and some other policymakers said it would not take much more news on rising inflation or stronger growth for them to follow suit.
On Thursday, BoE Deputy Governor Ben Broadbent sounded less worried about inflation, saying there were signs that consumers were cutting back on spending, and that the current “sweet spot” for exporting businesses, after the fall in the value of sterling, might not last.
Reporting by Kanishka Singh in Bengaluru and William Schomberg in London; Editing by Bill Rigby and David Milliken