LONDON (Reuters) - The Bank of England is likely to need to raise interest rates again to tackle inflation but will not do so aggressively, the central bank’s chief economist said in a newspaper article published on Sunday.
Andy Haldane, on a visit to northeast England, referred to the BoE’s statement after its policy meeting on Thursday that interest rates were likely to need to rise somewhat faster and to a somewhat greater extent than it had previously thought.
“We have a very strong eye on inflationary developments, and they’re currently ahead of our target,” the Newcastle Chronicle newspaper reported him as saying.
“That’s why we’ve raised rates once already and why ... we said that, on the balance of probabilities, it seems likely that some further tightening of policy might be needed over the period ahead,” he added.
The central bank raised interest rates for the first time in over a decade in November, and financial markets now see a roughly 70 percent chance of a further 25 basis point increase in May, which would take the BoE’s main rate to 0.75 percent.
Any interest rate rises over the coming year would be minor, the paper reported Haldane as saying.
“We’re in no rush, rates won’t remotely go back to levels we’ve seen in the past, but nonetheless keeping the cost of living under control is, we think, the single best and most important thing we can do to help the economy,” he was quoted as saying.
British consumer price inflation touched its highest in more than five years at 3.1 percent in November and the central bank forecasts that it will take more than three years to return to its 2 percent target if it does not raise rates.
(This story has been refiled to add economist’s first name in par 2)
Reporting by David Milliken; Editing by Andrew Heavens