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Sunday, January 30, 2011

The interest rate hike is on its way

A rate hike is looking more likely. Here is Martin Weale, the newest member of the Monetary Policy Committee, writing in the Guardian.

As we cast our votes at the January meeting of the Bank of England's monetary policy committee – ahead of last week's GDP figures – I saw a compelling case for an increase in the bank rate.

My concern is that, if businesses and pay-bargainers come to regard an inflation rate of 3%-4% as normal, it will become more costly for the MPC to keep inflation close to the government's 2% target.

The longer inflation stays above the target and the further it rises, the greater the risk that inflationary expectations will become built in.


A rate hike at the next MPC meeting looks very likely.

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