MPC member says prepare for rate rise

An influential member of the Bank of England’s Monetary Policy Committee has signalled he believes the time has come to consider increasing interest rates.

In an interview with the Financial Times, Martin Weale argued strong wage growth and low unemployment will need a response from the central bank, even if low oil prices continue to hold down inflation.

He told the newspaper he and one other MPC member almost voted for a rate rise at this month’s meeting.

He said: “If you’d asked me last autumn how rapidly I thought wages might pick up, looking at the most recent numbers, the movement seems to have been a bit faster than that.

“Recently, it seems that rather than [wage increases] fizzling out, the labour market … is fizzing away nicely”.

Weale said the slump in the oil price gave some “breathing space” around the timing of a rise, but this was now coming to an end.

He said next month would be too early for any increase, given the uncertainties around whether Greece will stay in the eurozone and the upcoming Budget on 8 July.

But he added: “If you were not to change policy rates because of what might happen, then you would end up not changing them. And … not changing rates ever would have worse effects than adjusting interest rates to fit the economic circumstances.”