(Wraps together McCafferty comments)
By David Milliken
LONDON, March 28 Bank of England interest
rate-setter Ian McCafferty highlighted a weak outlook for the
economy on Tuesday and said he did not know if he would vote to
increase borrowing costs at the next meeting of the BoE's
policymakers in May.
Britain's economy has performed much more strongly than the
BoE expected since last June's vote to leave the European Union,
faring better than all other major advanced economies bar
Germany last year.
Earlier this month one BoE policymaker, Kristin Forbes,
voted to raise rates due to fast-rising inflation.
Minutes of March's policy meeting showed that other unnamed
officials were contemplating joining her, and McCafferty had
been seen as a likely candidate as both he and Forbes had
opposed new bond purchases to stimulate the economy in August.
McCafferty appeared to play down speculation that he would
back a rate rise in May when he took part in a call-in show on
talk radio station LBC.
"The straight answer to that, Jamie, is I don't know,"
McCafferty said in response to a question from a listener.
The BoE forecasts that growth will slow during the latter
part of this year and into 2018 as households feel the effect of
higher inflation triggered by the pound's post-referendum slump
against the U.S. dollar, a view McCafferty shares.
"We will be raising interest rates and eventually reversing
QE (bond purchases) as soon as the economy looks strong enough
to bear it," McCafferty said.
Asked if the economy was strong enough now, he replied: "I
think the economy is strengthening slightly over the course of
last year and into the early part of this year. Whether it stays
as strong is still very much an open question, because we are
seeing inflation starting to pick up."
McCafferty said he expected higher inflation to crimp
consumer spending and lead to "anaemic" economic growth.
Last month the BoE forecast growth of 2 percent this year -
little changed from 2016 and at the top end of private-sector
forecasts - but a slowdown to 1.6 percent in 2018. Inflation is
expected to peak at 2.8 percent next year.
A day before Prime Minister Theresa May plans to formally
tell the European Union that Britain wants to leave, McCafferty
said he would be very surprised if Britain failed to reach an
acceptable deal during the upcoming two years of talks.
Leaving without a deal - which May said was an outside
option if talks broke down - could lead to a couple of years of
bad economic performance, McCafferty added.
(Additional reporting by Andy Bruce and William Schomberg;
Editing by Mark Trevelyan)