LONDON (Reuters) - The Bank of England is under no immediate pressure to raise interest rates, because wage growth is slow and inflation subdued, its chief economist said in newspaper interviews on Friday.
Andy Haldane - who started as chief economist this month -also reiterated the BoE’s message that when rates do rise, the increases will be gradual and will leave rates below historical levels.
“This is not going to be going up in clips of 50 basis points. It is going to be ever-so gradual, and even when that normalization is through and complete, we are not going back to where we came previously,” Haldane told the Yorkshire Post.
The BoE said over the past week that it might raise rates earlier than markets had expected, possibly before the end of this year, but economic slack still needed to be absorbed before that happened.
Haldane himself made the case for the BoE erring on the side of moving earlier rather than later in a speech on Wednesday, saying the central bank should be on the front foot rather than wait until the last moment to act.
Britain’s economy recovered rapidly over the past year, but wage and price growth has remained subdued. That has allowed the Bank to keep stimulating the economy through record-low interest rates.
Recent data only reinforced that tendency, showing British inflation fell to a 4-1/2 year low last month and pay growth slowed in April. “Right now, there aren’t signs of strong inflationary pressures, there aren’t signs of strong wage pressures, which is why we are in no rush and when the rate rises eventually come they can afford to be gradual,” he said.
The comments echoed those in an interview with the Scarborough News published earlier in the day.
Reporting by Ana Nicolaci da Costa; Editing by David Milliken, Larry King