Published: Wed, October 18, 2017
Markets | By Lucia Cruz

Bank of England's Ramsden says in no hurry to raise interest rates

Bank of England's Ramsden says in no hurry to raise interest rates

"Inflation rising potentially above the 3 percent level in the coming months is something we have anticipated", he told lawmakers on Tuesday.

July and August data showed consumer prices rose by 2.6% and 2.9% respectively-the highest since 2012.

Month-on-month, consumer prices gained 0.3 percent in September, as expected.

September's inflation figures were the last before the meeting, giving the numbers even more clout. Much of the increase however has been caused by the fall in the value of the pound since last year's Brexit vote which is likely to be a temporary driver of price increases. The 15 per cent or so drop in the pound against a range of currencies has ratcheted up the cost of imported goods such as food and energy.

Asked whether the MPC had enough interest rate "room" to deal with a possible recession, the Canadian responded: "Building a war chest in interest rate terms for a potential future shock isn't staying on point in terms of the inflation target, nor is it appropriate or necessary, given that policy can move quite nimbly if required". Inflation has actually trebled in the year from September 2016, when inflation was just 1 per cent.

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However, the impact of the lower exchange rate on inflation is set to ease as the annual change of prices due to the pound's decline drops out of the comparison.

Markets will also be paying close attention to Mr Carney's appearance before the Treasury Select Committee today.

"I think it's more likely than not that I will be writing on behalf of the MPC a letter to the chancellor", Carney said. To add insult to injury, an impending interest rate hike will increase mortgage repayments, directly affecting May's base: middle-class voters.

"Not raising rates now, having led the markets up the garden path on several occasions over the years would be as equally damaging to the banks credibility". Contributions of 200 words or more will be considered for publication.

"The tick upwards in inflation will increase expectations of a rate rise from the BoE later on this year, stoked by a flurry of hawkish rhetoric coming from Threadneedle Street".

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