Bank of England Saunders braces for anticipated rate hike

LONDON, October 9 (Reuters) – Bank of England politician Michael Saunders has called on households to prepare for a “significantly earlier” hike in interest rates as inflationary pressure intensifies in the UK economy, the Telegraph newspaper reported on Saturday.

Saunders said investors were right to bet on faster increases in borrowing costs with consumer price inflation exceeding 4%, adding to signs that the BoE could become the first major central bank to raise rates. since the start of the pandemic.

“I am not in favor of using code words or stating our intentions too precisely before the meeting. Decisions are made at the right time,” Saunders said.

“But the markets have incorporated in the last few months a hike in the bank rate earlier than before and I think that’s appropriate.”

Last month, the nine-member Monetary Policy Committee voted unanimously to keep rates at 0.1%. Read more

But Saunders and Deputy Governor Dave Ramsden voted to stop the BoE’s purchases of government bonds ahead of schedule.

Saunders said markets fully integrated a February rate hike by the UK central bank and incorporated half of an increase in borrowing costs in December.

“I’m not trying to comment on exactly which one, but I think it’s appropriate that the markets have taken a much earlier tightening path than before,” he said.

Saunders’ comments came shortly after BoE Governor Andrew Bailey said inflation exceeding the central bank’s 2.0% target was of concern and needed to be managed to prevent it from rising. anchor permanently. Read more

“We’re going to have a very delicate and difficult job to do, so we have to in a way prevent this from taking root permanently because that would obviously be very damaging,” Bailey told the Yorkshire Post newspaper.

Report by Maria Ponnerhath in Bengaluru; and James Davey in London; edited by William Schomberg

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