BOE Cunliffe: Timing of Hike Open Question: Economy Has Slowed

By David Robinson

     LONDON (MNI) - Economic growth has clearly slowed and the question of when

the first rate hike will be is "an open question", Bank of England Deputy

Governor Jon Cunliffe told Wales Online.

     In an interview on a regional visit Cunliffe made clear he was not

committed to supporting a rate hike at November's meeting, although he did

believe rates would eventually need to move higher.

     "I am not going to try and anticipate the meeting, but for me the economy

has clearly slowed this year," he said.

     The squeeze on real incomes due to higher imported inflation and soft pay

growth has hit economic growth, with the BOE forecasting economic growth will

remain stuck at around 0.4% quarter-on-quarter or around 1.5% a year. Cunliffe

noted, however, that the MPC also expected pay growth to rise through its three

year forecast period to around 3.5% at the end from 2.0% now.

     "That is going to put some domestic pressure on inflation, as the imported

inflation eases off. Now if that forecast comes to pass over the forecast

period, interest rates will need to go up," Cunliffe said.

     "The exact timing of when that (tightening) starts? Well, that for me is a

more open question," Cunliffe said.

     Cunliffe and fellow deputy governor David Ramsden are not expected to back

a rate hike in November, with doubts also raised over whether newcomer Silvana

Tenreyro will after her testimony last week at the Treasury Select Committee.

     Nevertheless, analysts anticipate a majority of the nine member MPC will

back tightening.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,M$$BE$]