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According to a newspaper interview that was released last Saturday, the Bank of England might be required to increase interest rates in the United Kingdom somewhat sooner than what Dave Ramsden, the deputy governor, had expected if wage growth picks up early in 2018.
Ramsden was one of the two policymakers who opposed the decision of the BoE last November to increase the interest rates for the first time in a decade. However, he appears to have somehow changed his stance in the comments that were published by the Sunday Times newspaper.
Earlier in February, the central bank said that interest rates might need to increase sooner and by more over the coming three years compared to what the policymakers had expected last November, because of a strong global economy and signs that wages are increasing faster than expected.
The Sunday Times quoted Ramsden was as saying: “We all will keep a close eye on what happens through the early part of this year to see if that (BoE) forecast of wage growth picking up to 3 percent is realised.
“But certainly relative to where I was, I see the case for rates rising somewhat sooner rather than somewhat later.”
Some economists that are polled by Reuters expect that the BoE will raise interest rates to 0.75 percent from the 0.5 percent by May 2018, and the financial markets price in a high possibility of an additional rate increase to 1 percent before the end of this year.
On Wednesday, Andy Haldane, the chief economist of the BoE, informed lawmakers that he thought interest rates might be required to increase slightly faster even compared to what the central bank had expected when it published fresh economic forecasts early in February.
However, during the same event, Mark Carney, the Governor of the Bank of England, said that future monetary policy decisions would heavily depend on how consumers and businesses react to the ongoing discussions on the terms of the departure of Britain from the European Union in March 2019.
The economy of Britain underperformed other major advanced economies in 2017 because of a hit to consumer demand from higher inflation that was triggered by the decline of the pound after the Brexit vote, as well as relatively weak business investment.
The rate of unemployment also increased slightly during the final quarter of last year, though at 4.4 percent, it remains near a 42-year low.
On Friday, Ramsden informed the Confederation of British Industry that the economy could not improve faster than 1.5 percent per year without beginning to add to pressures of inflation.