(Adds details from interview, background)
LONDON, May 28 (Reuters) - The Bank of England should raise interest rates sooner rather than later to avoid painful hikes in the future, but now is not the time to start, BoE policymaker Martin Weale was quoted as saying on Wednesday.
“If you want to have baby steps, you do have to start sooner,” Weale said in an interview with the Financial Times.
Weale is considered to be the member of the BoE’s Monetary Policy Committee who is most concerned that Britain’s economic recovery will push inflation above the Bank’s 2 percent target.
The BoE has held interest rates at a record low of 0.5 percent since the depths of the financial crisis more than five years ago. As Britain’s economy recovers, it has suggested that it could start to raise rates gradually in about a year’s time.
Weale told the FT he thought the BoE could hold off on raising rates for now. “How long that ‘bit longer’ will be I‘m not sure, but the best judgment I can have is that it’s not so urgent it needs doing now.”
Weale said he believed there was less spare capacity in the economy than earlier this year, when he estimated it was equivalent to 0.9 percent of gross domestic product, less than the central view on the MPC.
“I wouldn’t say that 0.9 had gone down to 0.7 or 0.6 but I think it’s fair to say there is less capacity than there was on the basis of the figures I looked at,” he told the FT.
Last week, the BoE said some of the nine members of the MPC believed the case for keeping rates on hold was more balanced.
“I very much can see risks both ways and ‘becoming more balanced’ means an increasing sense of having to balance and judge those risks,” Weale said in the interview.
He told the FT gradual increases in the BoE’s Bank Rate could mean it goes up by as much as 1 percentage point over a year.
The BoE has signalled it may not raise interest rates until the second quarter of next year. Its case has been helped by a fall in inflation to its lowest levels in more than four years this year, although it picked up to 1.8 percent in April. (Writing by William Schomberg; Editing by Andrew Roche)