Bank of England’s chief economist believes rate rise needed to keep lid on inflation

Bank of England chief economist Andy Haldane said on Thursday that the central bank needed to “look seriously” at raising interest rates to keep a lid on inflation, even though he was happy with their current level. Last week, Haldane surprised financial markets by saying he was likely to vote for an interest rate hike this year.

“We need to look seriously at the possibility of raising interest rates to keep the lid on those cost of living increases,” Haldane told the BBC during a visit to Wales.

“For now we are happy with where the rates are, we need to be vigilant for what happens next.”

British inflation is at its highest level in nearly four years, tightening the squeeze on consumers who now face the added worry of political uncertainty after this month’s inconclusive election.

Haldane said in a separate interview on Thursday that interest rates needed to be set in a way which minimised the risk of persistently high inflation.

“First and foremost, we need to set our interest rate policy to prevent those higher inflation rates becoming entrenched,” Haldane told the Guardian newspaper.

Haldane said that in addition to breaching the bank’s inflation target of 2 per cent another reason high inflation was a concern was because of its impact on the poorest.

This “is having big and serious consequences for those on the lowest incomes in society and that came across loud and clear today,” Haldane said.