Bank of England Warning Over Interest Rates

Bank of England Warning Over Interest Rates

18 August 2015

A key Bank of England official has warned of the dangers of "lingering too long in the sun" with low interest rates, in the latest sign that it is edging towards a hike.

Kristin Forbes, a member of the Bank's rate-setting Monetary Policy Committee (MPC), said that waiting too long for an increase risked undermining the recovery.

A fall in inflation - expected to have remained at zero in July when official figures are published today - has eased any pressure for a rates hike.

Ms Forbes, writing in the Daily Telegraph, said it was tempting to put off any increase while enjoying the flat cost of living, higher wages and strong economic growth, but added: "Linger too long in the sun and your skin may take on a slightly pink glow. If you ignore the warning signs, you may have a painful sunburn."

Inflation remains below its 2% target, but a hike in interest rates would be expected take one to two years to have maximum impact, Ms Forbes added.

"Interest rates will need to be increased well before inflation hits our 2% target. Waiting too long would risk undermining the recovery," she said.

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