Bank of England chief economist Andy Haldane said on Tuesday that a sharp increase in market expectations for an interest rate hike could tighten credit conditions and harm the economy.
Haldane said he was comfortable with the central bank’s neutral policy stance, pointing out that trying to read the path of Britain’s economy was “unusually difficult” following last year’s Brexit vote.
“In the current fragile environment, however, I would be concerned if there were to be too sharp a rise in market interest rates, in expectation of Bank Rate being raised in the near future,” Haldane said in a written annual statement to lawmakers.
He said this could tighten credit conditions, restricting consumer and business spending. “That triple-whammy could cause a sharper slowing in the UK economy than I believe would be desirable from a monetary policy perspective,” Haldane said.
Market interest rates rose earlier this year as Britain’s economy held up better than expected after June’s referendum decision to leave the European Union. The BoE dashed that speculation this month when it signalled it was in no hurry to raise rates.
(Reporting by Andy Bruce; Editing by William Schomberg)