THE economic recovery might stall if interest rates rise too soon, the Bank of England’s chief economist said on Friday as he offered the strongest signal yet that the bank is prepared to delay increases in borrowing costs.
Andrew Haldane, who is from Leeds, said he was more downbeat about the outlook for the economy, given weaker global growth, greater financial and political risks and the danger that wages and productivity in Britain might continue to fail to recover as forecast. “Put in rather plainer English, I am gloomier,” Mr Haldane said in a speech to businesses in Kenilworth. “This implies interest rates could remain lower for longer, certainly than I had expected three months ago.”
Mr Haldane, who took over as chief economist at the BoE in June, gave an unusually specific steer to financial markets on when the BoE might start to raise interest rates.
In an interview with ITV television, he said market expectations that rates might rise “somewhere in the middle of next year” were possibly “not a bad bet” although the economic outlook could change a lot before then.
Sterling fell by around half a cent against the dollar after Mr Haldane’s speech was released. It also dipped against the euro.
UK base rates have sat at a record low of 0.5 per cent since the depths of the financial crisis more than five-and-a-half years ago. Mr Haldane attended Guiseley School.