LONDON, May 29 (Reuters) - Raising interest rates in small increments when the time comes could reduce the risk of the Bank of England making a mistake, Deputy Governor Charlie Bean said in an interview published on Thursday.
“There is an argument for trying to move cautiously in baby steps. If you take large steps there is a greater likelihood of getting it wrong,” Bean told the Cardiff-based Western Mail newspaper on a visit to Wales.
“When the Bank Rate does rise - and we don’t think there is a case for an immediate rise - we expect it to do so gradually and to a level in the medium term which is likely to be materially below its pre-crisis average of around 5 percent,” he added, repeating the BoE’s current guidance.
Bean said the timing of a rate rise would hinge on whether productivity improved and reduced the inflationary impact of a pick-up in wage growth that he thought was possible in the second half of this year and into 2015. (Reporting by David Milliken and Ana Nicolaci da Costa; editing by William Schomberg)