The Bank of England is likely to raise interest rates again although not by as much as it did in previous monetary tightening cycles, according to comments by its chief economist.
Charlie Bean said rates would not have to rise as they did in previous cycles because high debt levels meant the recent rises had a bigger impact than in the past.
"It is certainly possible that we may need to raise rates less to cool demand than was the case in the past," Mr Bean told The Irish News. "We are now back in the sort of territory that you might think of as a more normal level. It might be a bit higher than we are."
The comments echoed the tone of the Bank's inflation report earlier this month, which the markets said pointed to rates peaking at about 5 per cent rather than the 6 or 7.5 per cent seen in the past two cycles.
The Bank's Monetary Policy Committee, which has raised rates five times since last November to tackle surging house prices, borrowing and high street spending, would leave them on hold when it meets next month.
Mr Bean said high oil prices, which climbed to within a whisker of $50 a barrel last week, were more of an "irritant" than a threat. Prices have since fallen to $45. "We'd be reasonably relaxed at current levels," he said. "In real terms, the price of oil is about half what it was in the peaks in 1974/75 and the late 1970s." He also said oil prices would be a serious issue only if they reached between $80 and $90 a barrel, but that was an unlikely scenario.
Jean-Claude Trichet, the president of the European Central Bank, said the surge in oil prices was unlikely to derail an economic recovery in the eurozone. Meanwhile Alan Greenspan, the chairman of the US Federal Reserve, said this week that higher fuel costs would not harm the US economic recovery.
Mr Bean reiterated the central bank's view that house price growth is easing, according to The Irish Times. Surveys from estate agents groups, including the Royal Institution of Chartered Surveyors, point to a slowdown in growth in prices, which have more than doubled since 1997.Reuse content