Hawkish Martin Weale could be set to change interest rate hike vote
UK rate-setter Martin Weale has hinted he could revert back to voting for a hike in interest rates, a decision he had only recently reversed.
“Despite the international concern about very low inflation, I see the decision of whether or not to tighten policy as finely balanced,” the Bank of England official told an audience of sixth-formers yesterday.
“Our work suggests that a change to bank rate takes about two years to feed through fully to inflation. The implication of this is that we should not try to keep inflation very close to target all the time; if we did that, we could be sure that interest rates would be extremely volatile, in a way that no one would find very helpful.”
Weale then warned that developments in the labour market could spark a return in inflation. He said: “With unemployment continuing to fall… inflationary pressure seems to me to be at risk of building.”
He played down the impact of oil prices on inflation. “The fall in oil prices has certainly provided some unexpected breathing space. It is, however, at present no more than that.”