Interest rates should be held until there is more certainty that inflation is under control, a Bank of England policy maker has said.
Jonathan Haskel, a member of the Monetary Policy Committee, warned inflation could creep up from the government target of 2 per cent, which it reached for the first time in three years last month, if rates were cut too soon.
The base rate of interest was held at 5.25 per cent for the seventh consecutive meeting in June, after the MPC voted by a majority of seven to two to keep rates constant.
In a speech on Monday (July 8) at King’s College London, which marked Haskel's final eight weeks as part of the committee, he said: “I would rather hold rates until there is more certainty that underlying inflationary pressures have subsided sustainably.”
Haskel claimed inflation would remain above target for “some time” due to pressures in the jobs market.
He said: “The playing out of those shocks through the economy, and the continued tight and impaired labour market, means that inflation will remain above target for quite some time.”
Haskel said for this reason the MPC will be “looking closely” at labour market conditions when considering the bank rate.
Haskel is one of nine members of the MPC, which meets eight times a year to decide on where to set the bank rate, which has been held at 5.25 per cent since August 2023.
Concluding his speech, he said: “A central bank is part of a very delicate social bargain: trusted with great powers, but having to earn that trust
“Anyone working at the Bank of England knows what a privilege it is to be given that trust.
“Equally, anyone leaving the Bank knows it is bigger than any single individual. With good data, models and economics my successors can take and explain hard decisions.
“There will be times when this doesn’t earn the public’s affection, but it will end up earning their trust.”
tara.o'connor@ft.com
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