BOE Vlieghe: Point At Which Pull Trigger On Hike Moving Nearer

--Vlieghe Says Tightening Will Be More than Just Reversing Aug Cut

By David Robinson

     LONDON (MNI) - Bank of England Monetary Policy Committee member Gertjan

Vlieghe said that the point at which the Bank was set to pull the trigger on a

rate hike was moving nearer and that subsequent tightening would likely amount

to more than just reversing the 25 basis point cut from August last year, a cut

that came following the vote to leave the European Union.

     Vlieghe, speaking to reporters after his speech at the Society of Business

Economists, said that the MPC had consistently put out the message that market

rate expectations were probably too low. Now the time for a rate hike was

approaching.

     As the market rate curves which the MPC thought were likely too low already

had a couple rate hikes priced in over a three year period Vlieghe said that it

was obvious that the committee was likely to do more than just reverse the 25

bps cut that took Bank Rate down to 0.25%.

In his speech, Vlieghe made clear that he was in the majority on the MPC in

believing a rate hike could be justified in coming months.

     "If these data trends of reducing slack, rising pay pressure, strengthening

household spending and robust global growth continue, the appropriate time for a

rise in Bank Rate might be as early as in the coming months," Vlieghe said in

his speech.

     Vlieghe has championed the view that we are currently in a low interest

rate environment, and he reasserted this belief in his speech, with demographics

and income distribution driving down the equilibrium real interest rate.

However, these medium-term considerations are not decisive for Vlieghe in

deciding whether to raise Bank Rate from 0.25% and he said that with inflation

pressure mounting a rate hike could be appropriate "in coming months."

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

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