The Bank of England should hike interest rates twice in the next two years, according to one of the Bank’s top economists.
Ian McCafferty, a member of the BoE’s monetary policy committee, was one of three members who voted to raise the bank rate from its current historically low level of 0.25% to 0.5% when the committee met in June.
Mr McCafferty argued that rates should be lifted in order to allow for cuts in the future is the economy were to falter.
He said; “We would expect to see a couple of modest rate rises over the next couple of years or so. We would like to get back to a position where we could move rates both ways. The pickup in inflation is not something we can just ignore.”
The former chief economic advisor to the Confederation of British Industry, said that businesses had performed well over the last year and could withstand a rise in interest rates.
Mr McCafferty is not the only member of the MPC telling the Bank to consider raising interest rates.
In June, Andy Haldane, chief economist at the Bank of England and MPC member, voted to keep interest rates on hold, but has since urged the BoE to ‘seriously consider’ raising interest rates.
Mr Haldane said; “We need to look seriously at the possibility of interest rates rising to keep the lid on those cost of living increases. For now we are happy with where the rates are, but we need to be vigilant for what happens next.”
At its last meeting in June, the MPC voted by five to three to keep interest rates on hold at 0.25%. The three who voted to increase rates argued that the Bank needed to take action to bring down inflation, which reached 2.9% in May, almost a full percentage point above the Bank’s target of 2%.
Mr Haldane’s comments may indicate the split over rates on the MPC may be narrowing as he had previously voted against a rise in rates.
A rise in interest rates would be worrying for homeowners with outstanding mortgage debt as it could lead to significantly higher monthly repayments, especially for anyone on an interest only mortgage.
If you are worried about the impact a rates rise could have on your finances, contact Negative Equity UK on 0161 631 2727 or online at negativeequityuk.com.