Interest rates ‘need to rise and will rise’ says Andrew Bailey
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The Bank of England chief said he could not commit to outlining how far the rise of interests rates will go but confirmed a hike is on the way. Mr Bailey said rates in the four to five percent rates however will not be possible due to persisting factors influencing low rates since the global financial crisis. BBC Today programme host Justin Webb asked: “Is it your view then, because it certainly seems to be the view of the markets, that we could have interest rates rising to around 1 percent and that that will happen in the coming months?
“Can you say?”
Mr Bailey said: “I think we’ve been quite clear that we think interest rates will need to rise and they will rise.
“We don’t put a number on it. But, actually, there’s an important point – you suggested one percent, I’m not going to endorse one percent but I’m going to make a broader comment on that.
“I think it’s correct to think in those terms because what it means is the world of low inflation and low-interest rates we’ve been in since the financial crisis, which we would have regarded four, five percent as a norm, we’re not going back there.
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“Globally, the factors that have driven interests rates low are likely to persist.”
On Thursday, the BoE surprised some by holding interest rates at 0.1 percent despite warning inflation could hit as high as 5 percent.
The Bank’s remit is to keep inflation at between 2 percent and 3 percent.
Mr Bailey insisted the remit of the Bank is to keep inflation low but the current high prices are outside of its control.
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The Governor said: “Raising interest rates won’t produce more gas, it won’t produce more semi-conductor chips.
“Where we have to use interest rates is where we see the potential for demand to rise or the potential for wage pressures to come into play, which can be self-perpetuating and we will do that.”
He added: “Inflation is clearly something that bites on people’s household income and they will feel that.
“I’m sure they already feel that in terms of prices going up and I’m very sorry that’s happening… we want to see the causes of inflation, which are to a considerable degree global and supply issues, tackled as soon as possible so we can get to a world where inflation is stable and down at the target… we’re not going back to the 70s. That was a very different era.”
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Mr Bailey continued: “We have to occasionally make quite direct comments on what we think will happen.”
The Governor denied the central bank “bottled it”, adding: “We expect interest rates to rise and we are very clear.
“If you ask the question ‘why haven’t you done it now?’ The answer is all to do with the labour market… there were a lot more people using the furlough scheme right up to the end.
“The labour market looks tight in this country at the moment but the missing piece of evidence is just what has happened after the end of the furlough scheme and we don’t have any data to guide us on that.”
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