Bank interest rate rise may be steeper than expected20 Nov 2021 08:47
From the Times:
"The Bank of England’s chief economist has raised the prospect that its first interest rate rise could be steeper than previously thought as concerns grow about inflation.
Financial markets have assumed that rate-setters would increase the base rate from 0.1 per cent to 0.25 per cent when they opt to increase borrowing costs for the first time since 2018, potentially at their meeting next month.
However, Huw Pill refused to confirm yesterday that the monetary policy committee’s first tightening move would be to increase rates to 0.25 per cent, opening up the possibility that the Bank could vote to increase rates even higher.
Two members of the nine-member rate-setting committee, not including Pill, voted to increase rates by 0.15 percentage points at the last meeting. Asked if it was safe to assume that, whenever it came, this would be the Bank’s first tightening step, Pill said he could not confirm this: “That reflects a genuine uncertainty at a personal level, that I will want to see how I will assess the situation.”
Pill, who joined the Bank two months ago, added: “I don’t want to give an impression that there is a piece of data that will come out and I will look at that and say, ‘Okay, it’s zero or 50 or 25 or 40 basis points or whatever.’ There is an attraction at some point to getting back to a multiple of 0.25 . . . but we are not under pressure to do that immediately.”
The MPC wrong-footed financial markets a fortnight ago by holding its rates at historic lows, despite hawkish speeches from MPC members, notably Andrew Bailey, the governor, and Pill.
The former Goldman Sachs economist suggested that the case for a rate rise has become stronger since then after buoyant economic data and surveys. “The burden of proof is perhaps a little bit in the other direction, so now I’m looking perhaps for reasons not to hike rates,” Pill said.
His comments could give a further boost to the pound, which has enjoyed its strongest week against the euro since the early phase of the pandemic amid expectations that the Bank will tighten policy sooner and more aggressively than its Frankfurt-based counterpart. The pound has risen by 0.3 per cent to 1.1905 against the euro."
https://www.thetimes.co.uk/article/interest-rate-rise-may-be-steeper-than-expected-bank-suggests-frnrqdjjb
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