Interest rates to rise “pretty soon”

Interest rates to rise “pretty soon”


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The Bank of England has dropped another hint that interest rates are set to rise with departing policy maker David Miles saying it will happen “pretty soon” as UK economic growth picks up.

Miles is leaving the Bank’s monetary policy committee after six years but told BBC Newsnight that the time to rise hike rates was drawing closer.

“I think it’s pretty soon, and I don’t think it’s anything to worry about. It’s a sign the economy is returning to a more normal position.

“It’s taken a long time to get there, and we’re not fully there yet.”

His comments followed Wednesday’s surprise jump in core inflation that analysts said could bring forward the first rate increase.

Miles said UK corporate and consumer confidence was strong, and the financial system is operating “near-normal” now.

The key issue was judging at which diminishing slack in the economy and rising cost pressures rise warrant raising rates, he said.

MPC members Martin Weale and Kristin Forbes have both suggested that a rate rise is not far away.

Yet some analysts say the US Federal Reserve is now likely to retreat from its expected September rate hike.

US inflation fell in July, with both the headline and core consumer prices index increasing 0.1% month-on-month, short of consensus forecasts for a 0.2% rise.

Paul Ashworth, chief US economist at Capital Economics, said the figures will give the Fed pause for thought at its next meeting in mid-September.

“On balance, we still think the Fed will go ahead and raise rates in response to the further improvement in labour market conditions.

“But the decision is finely balanced. With price inflation and wage growth still muted, a case can also be made for waiting.”

A delayed interest-rate hike in the US could also convince the Bank of England to take it slowly.

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