November rate rise is 'open question', BoE's Cunliffe says

LONDON (Reuters) - Bank of England Deputy Governor Jon Cunliffe again raised doubts about whether he will back an interest rate rise next week, describing it as an “open question” in an interview published by a Welsh newspaper on Monday.

Britain's Deputy Governor of the Bank of England Jon Cunliffe speaks during the Bank of England's financial stability report at the Bank of England in the City of London, Britain June 27, 2017. REUTERS/ Jonathan Brady/Pool

Most economists polled by Reuters predict the Bank will raise borrowing costs for the first time in more than a decade on Nov. 2, after the central bank last month said the majority of its policymakers expected rates to rise in the coming months.

But Cunliffe and his fellow deputy governor, Dave Ramsden, have made clear over the past week that they are some way from seeing the case to raise rates next week.

“I am not going to try and anticipate the meeting, but for me the economy has clearly slowed this year,” Cunliffe said in an interview with Wales’s Western Mail newspaper.

Echoing language he used in an interview with BBC Radio Wales last week, Cunliffe said rates would need to rise if domestic inflation pressures picked up as the Bank predicted, but he had not decided when this process should start.

“Over the forecast period of three years rates will need to rise. The exact timing of when that starts? Well, that for me is a more open question,” Cunliffe said.

Rates would not need to rise as high or as quickly as during tightening cycles before the financial crisis, he added.

Britain’s economy grew at a quarterly rate of 0.3 percent in the first half of this year, its weakest since 2012 and half its long-run average. Inflation has hit a five-year high of 3 percent, but the Bank says this mostly reflects the effect of the fall in the pound after last year’s Brexit vote.

But the central bank is concerned that the lowest unemployment since 1975 and possible dislocation from the Brexit process will limit the economy’s ability to grow faster without generating excessive inflation.

The legacy of the 2008-09 financial crisis was still bearing down on the economy,” Cunliffe said.

“We saw investment really dry up in the years after the financial crisis and that’s starting to have an impact on productivity now,” he said.

Reporting by David Milliken; Editing by Alistair Smout and Catherine Evans