Economist warns of impact of US rate rise

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The start of US interest rate rises could inject volatility into global financial markets and create risks for Britain’s financial stability, a new member of the Bank of England’s top panel of financial regulators said yesterday.

Alex Brazier, who took a seat on the BoE’s Financial Policy Committee on Monday, cited the normalisation of US borrowing costs as one of the main global risks for markets.

The FPC was set up in 2013 after the failure of Britain’s financial regulation to protect the country against the 2007-08 financial crisis. Last year it imposed curbs on large mortgages and required banks to hold more reserves against potential losses.

Brazier – in remarks which share concerns expressed by other BoE officials – said rate hikes by the US Federal Reserve or a change in perceptions of their timing and scale would reflect good news about the US economic recovery.

“However, it would probably reduce the extent of the search for yield and prompt a reduction in global risk appetite,” Brazier said.

Brazier joined the BoE in 2001 after university, and most recently served as principal private secretary to Governor Mark Carney and his predecessor, Mervyn King.

“Both of them pushed me to the edges of my limits,” Brazier said.

He is now the BoE’s executive director for financial stability, strategy and risk. This is a new role created last year by Carney as part of a shake-up of the bank.