Bank of England deputy governor enters interest rate debate

The deputy governor of the Bank of England (BoE), Sir Jon Cunliffe, has reportedly stated that the next change to interest rates will be an increase.

In an interview with the Financial Times, Sir Jon also claimed that people should not believe that a change in monetary policy will be put on hold until 2017.

Regarding interest rates, he said: “The next move, in my view, is up.

“I also believe the economy has come out of a pretty wrenching period and a number of the indicators on both the supply and the demand side are much harder to judge than when I was on the MPC as the Treasury observer for five years between 2002 and 2007.

He also supported the recent message from the Monetary Policy Committee, that any interest rate rise will be “limited and gradual”.

According to the BoE’s latest inflation report, interest rates will be on hold until 2017 due to the fact that there is only a 55 per cent chance that inflation will exceed the bank’s two per cent target.

However, Sir Jon, has argued that the report is based on “an overshoot in inflation at the two-year horizon and an overshoot in inflation at the three-year horizon. The overshoot at the three-year horizon was one of the largest we have shown”.

Mark Carney, governor of the Bank of England, stated this week that he is pleased with the financial situation in Britain, claiming that the nation’s banking system is “within sight” of having the best possible level of capital.