Bank of England in no rush to hike rates, says chief economist Spencer Dale

Bank of England in no rush to hike rates, says chief economist Spencer Dale (PA)

The Bank of England is set to maintain interest rates at a record of 0.5 per cent for a "sustained period of time" as the economy takes time to regather momentum, the Bank's chief economist Spencer Dale said today.

In a local radio interview Dale underlined that the Monetary Policy Committee will only raise rates from their current record low of 0.5% “when we see a sustainable recovery and the economy is strong enough to withstand it”. He added: “The key message we have been giving to business is that that is not going to happen anytime soon.”

Dale’s latest comments come against the backdrop of an improving economy after 0.8% growth between July and September, although output is still 2.5% below its pre-recession peak.

He told the BBC: “We had a very deep recession. We have a number of years where the economy hasn’t grown. I think we will need to see a number of years of strong, sustained growth until the economy starts to feel more normal again”

Under the Bank’s forward guidance regime, the MPC will not even consider rate hikes until unemployment falls to 7%, as long as inflation remains under control. Its latest forecasts say this could happen as early as the end of next year, although rate-setters are at pains to stress this is a “threshold not a trigger” for rises.

Dale added that banks “have lost an awful lot of trust (from businesses) and they have really hurt those relationships... That sort of trust will take some time to come back”.