LONDON (Reuters) - One of the Bank of England’s interest rate-setters said on Monday he favored keeping borrowing costs at their historic low, despite a shift among some of his peers at the central bank in favor of a first hike in a decade.
Gertjan Vlieghe, one of the eight sitting members of the Monetary Policy Committee, told the Independent newspaper:
“This is an environment where a premature hike would be a bigger mistake than one that turns out to be slightly late.”
Vlieghe is widely considered to be the MPC member who is most supportive of keeping rates low. He voted for a rate cut in July last year, shortly after the Brexit vote, a month before his colleagues followed suit.
Britain’s economy has slowed as the rise in inflation since the Brexit vote and a slowdown in pay growth have hurt consumer spending.
“I think the consumption slowdown is here, it’s not over,” Vlieghe said. “I don’t think there’s going to be a sufficient offset from investment and net exports to compensate for that.”
Some BoE officials do believe that the consumer slowdown will be offset by higher exports and investment. Two of the sitting eight monetary policymakers voted last month for a rate hike. A third supporter of a hike has since left the BoE.
Shortly after last month’s 5-3 split, the Bank’s chief economist, Andy Haldane, said he was also likely to vote for a rate hike later this year, adding to speculation that Britain might be heading for higher borrowing costs far sooner than investors had been expecting.
BoE Governor Mark Carney has said he will watch to see how the economy copes with Brexit and for any signs of improvement in weak wage growth as he considers whether to raise rates over the coming months.
Vlieghe said that, while inflation was “uncomfortably high”, upward pressure on prices would also prove temporary.
“What I want to emphasize is that I don’t think there is no risk from keeping rates on hold. I just think that we are still in an environment where one of those risks is bigger than the other one,” he told the Independent.
The MPC’s next policy decision is due on Aug. 3.
Reporting by Alistair Smout; Editing by William Schomberg and Kevin Liffey