Rate Hike Indicates Healing Economy, Haldane Says

Andy HaldaneAndy Haldane
  • Rate Hike Indicates Healing Economy, Haldane Says

Bank of England’s chief economist, Andy Haldane said an interest-rate increase should be seen as good news for the U.K. economy and not a source of fear.

Speaking to Sky News, Haldane revealed he is among policy-makers who believe that the economy is nearing the point where stimulus reduction might be necessary.

The Bank of England’s key interest rate is at a record-low of 0.25 percent.

Inflation

Since inflation rate rose to 2.9 percent in August, the odds of the BOE raising rates in November has jumped to almost 80 percent from about 60 percent. An interest-rate increase on November 2 would be the first by the apex bank in more than a decade.

“This would be a sign of the economy healing, and therefore adjusting to that healing process,” Haldane said. “So rather than being a source of fear or trepidation, this ought to be a good news story about the economy proving resilient.”

Haldane’s comments are the latest indication that the Bank of England is getting close to monetary tightening after adding additional stimulus in the wake of the referendum a year ago.

Governor Mark Carney has said the economy’s growth potential has been undermined by the Brexit, pressuring prices higher even at 0.3 percent growth rate. The lowest growth rate among group seven nations.

Two of the policy-makers are already voting for a hike, while Carney himself said he sees a rate increase in coming months.

Haldane who was speaking on the eve of BOE 20 years independence said the slow wage growth even with the unemployment rate at a four-decade low necessitate a review of current monetary stance.

Governor Carney will address the gathering at the BOE conference to celebrate 20 years. So will Prime Minister Theresa May, who last year blamed loose monetary policy for widening inequality.

Since the BOE hawkish statement in September, the pound has gained across board as investors dramatically priced in their expectations for higher rate in December.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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