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By David Robinson
LONDON (MNI) - Bank of England Monetary Policy Committee member Ian
McCafferty said in an LBC radio interview that another two rate hikes following
the 25 basis point move at the November meeting should get inflation back to
around the 2% target.
McCafferty backed the MPC's decision not to restate at its November
Monetary Policy Summary its line that financial markets, which are pricing in
two more hikes, were underestimating the likely amount of tightening.
He pointed out that the MPC's central projection on market rates did show
inflation returning to close to target. Headline CPI was shown at 2.15% in three
years' time assuming two more 25 basis point hikes, raising Bank Rate to the 1%
The MPC had stated in August and September that markets were likely
under-pricing the total amount of tightening. That line was dropped in the
McCafferty also said that he expected commercial banks to pass on the 25
basis point rate hike to savers in the fullness of time. So far, lending rates
have been raised but banks have been more reluctant to hike saving rates.
He was one of the seven on the nine member MPC who voted for a 25 basis
point rate hike at the November meeting, having previously voted in the minority
for a rate increase at the June, August and September meetings.
--MNI London Bureau; tel: +44 203-586-2223; email: email@example.com