The Bank of England (BOE) might surprise markets with a faster increase in interest rates than is currently expected, a member of the central bank's Monetary Policy Committee told.
Market players have priced in a little bit more than one rate hike over the next 12 months. But, according to the BOE's Michael Saunders, this might be too cautious.
"If the economy plays out as I expect, it may be that rates need to go up a little faster than that," Saunders told in reference to market expectations.
Saunders, who's described as one of the more hawkish members of the central bank and actively votes for rate hikes, also said: "My expectation, conditioned on Brexit unfolding in sort of a smooth and gradual way, the economy will continue to grow at around the pace we have seen over the last couple of years ... (I) expect the jobless rate to fall a little further; and pay growth will pick up a bit.”
“Against that background, I think that yes, rates might need to rise a little faster," he added.
At the bank's last meeting in June, members decided to keep rates unchanged at 0.5 percent. However, the details of the decision showed that three out of the nine policymakers were in favor of a rate increase to 0.75 percent.
Some analysts believe that this split vote could mean a rate increase as early as next month.
However, Saunders highlighted that even if rates go up at a faster pace than markets expect, this will be done in a gradual way.
Chart: Used with permission of Bloomberg Finance L.P.
Read more:
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.