Bank of England deputy governor warns rates may need to rise if inflation pressures build

The Bank of England may need to raise interest rates if growing inflation pressures strengthen further, Deputy Governor Dave Ramsden said on Monday, opening the door publicly to rate rises after months of the Bank holding fire.

“Whilst the policy stance continues to provide restrictiveness, were upside pressures on the inflation outlook to continue to build, there could be a case for increasing Bank Rate,” Ramsden said in a speech to London’s Money Macro and Finance Society.

The remarks echo the message Ramsden gave in the minutes of September’s Monetary Policy Committee decision, at which he was part of the 6-3 majority that voted to keep rates on hold. The speech lands ahead of John Healey’s first budget on October 28, with the government’s finances already tight.

Unlike the European Central Bank and the US Federal Reserve, the BoE has not raised rates since the start of the Iran war, partly because its stance was already restrictive. Fears of persistent inflation caused by the Iran war have driven government borrowing costs to repeated multi-decade highs in recent weeks, according to Reuters reporting.

The warning leaves borrowers facing the prospect that borrowing costs may climb rather than fall in the months ahead, even as the Burnham government looks to new jobs from investment in sectors such as defence to drive growth.

Sources

• Reuters: Bank of England’s Ramsden says rates may need to rise if inflation pressures build
• Reuters: UK’s Healey puts defence in focus for reindustrialisation push