Business

Bank of England executive calls for interest rate rise

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The Bank of England should increase interest rates now despite signs of softening growth, one of the Bank's policymakers has said.

Ian McCafferty is a member of the nine-strong Monetary Policy Committee (MPC) which votes on interest rates each month.

Writing in The Sunday Times, he said raising rates now would mean they could increase gradually.

Mr McCafferty has voted for an interest rate hike each month since August.

"Starting to raise Bank rate now makes it more likely that the increase required over coming years to deliver our inflation target can be kept gradual and limited," he wrote.

There had been speculation that Mr McCafferty and fellow MPC member Martin Weale, who has also voted for a rate hike for the past three months, might change tack after data suggesting growth was softening.

On Friday, official data showed UK economic growth slowed in the three months to September, with the economy expanding by 0.7%, the Office for National Statistics said.

Mr McCafferty admitted the timing, when inflation was 1.2% and well below the Bank's 2% target, may appear "puzzling", but said the MPC needed "to look forward".

"Ensuring that we act in good time and move rates slowly, to allow consumers and businesses to adapt with minimum disruption, is, I believe, the best way of supporting and sustaining the economic expansion now under way," he said.

The Bank of England cut interest rates to 0.5% in early 2009, and has kept them at this record low ever since.

Minutes from the MPC's October meeting, when members voted 7-2 to hold interest rates at 0.5%, said that for most members, there was "insufficient evidence" of inflationary pressure to raise rates.

Most economists are expecting the MPC to start raising rates around the middle of next year.

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