Bank of England warns recovery is ‘flattening’, but rate hike still at stake
The Bank of England is getting closer to a rate hike, despite the UK’s economic recovery “flattening”, Andrew Bailey told MPs.
The central bank governor said all of the Bank’s monetary policy rate-setting committees agreed last month that it was not the right time to raise interest rates.
But half the panel was confident the minimum conditions for an increase had been met, meaning an increase is getting closer, he told the House of Commons Treasury Committee.
Bank of England governor Andrew Bailey (pictured) said all the interest rate determinations of the central bank’s Monetary Policy Committee agreed that now was not the right time to raise interest rates.
This is despite concerns that the UK’s recovery from last year’s slump is slowing.
Bailey said, “Right now we’re seeing a flattening of the recovery. The short-term indicators point to that.’
Referring to payment data and numbers on how many people went out, Bailey added that there was “a flattening in the recovery rate.”
He added that staff shortages, concerns about rising Covid numbers and supply chain bottlenecks have all held back economic activity.
He was one of four MPC members last month who believe the Bank may be justified in raising interest rates from their record low of 0.1 percent.
He said it would be “reasonable” to expect an increase in the coming years. The Bank cut rates last year to encourage spending as economic activity fell off a cliff during the lockdown.
It said it would not consider raising rates again until there was “clear evidence that significant progress was being made” to get unemployed workers back to work and reach the 2 percent inflation target.
But Silvana Tenreyro, a member of the MPC, said she did not believe the conditions had been met, as many workers were still unemployed, had decided to stop looking for work or were still on leave.
Bailey was cautious about inflation, or increases in the cost of living, which the Bank predicts will reach 4 percent this year.