Jon Cunliffe is the latest Bank of England policy maker to sound a cautious note on whether interest rates should rise for the first time in a decade next month.
Speaking in an interview on BBC Radio Wales, the BOE’s Deputy Governor said that while he’s “very clear” a slow and gradual process of raising rates would be warranted if the bank’s latest economic assessment is proved correct, he is less sure when that should begin.
“For me, when that process starts is a more open question and my decision will be based in large part on whether I see domestic inflation pressures and what I start to see happening to pay in the economy.”
Economists and traders have brought forward their expectations for a BOE hike since the minutes of the September meeting showed a majority of officials felt that an increase was warranted in coming months. Still, Cunliffe’s comments on Thursday are the latest to suggest that the Nov. 2 decision is not yet cut and dried.
“The economy is growing but it’s not growing as quickly as last year,” Cunliffe said. “It is employing more people, employment is strong. But we’re not seeing pay pressure and for me we’re not seeing sustained signs of domestic inflation pressure.”
That echoes some of the sentiments of new Monetary Policy Committee member Dave Ramsden, who said on Tuesday that he didn’t join the majority view on the rate outlook last month. His colleague Silvana Tenreyro said while the U.K. was nearing a “tipping point,” she wanted to see how the data pan out.
In his own testimony, Governor Mark Carney stuck resolutely to the MPC’s “in coming months” language, and signaled that the erosion of slack in the economy is the primary concern.
With the pound’s drop since the Brexit vote helping to push inflation to 3 percent for the first time in 5 1/2-years, investors are pricing around an 82 percent chance of an increase in the key rate from a record-low 0.25 percent on Nov. 2. More than three-quarters of economists in a Bloomberg News survey also expect a move.
When asked how he would vote in November, Cunliffe said that he was not in the business of anticipating the outcome of MPC meetings before they take place.