THE Bank of England is in no rush to hike interest rates and when it does, the increase could be as slow as half a percentage point a year, chief economist Andy Haldane said in an interview.
“We are in no rush to raise rates, the recovery is taking hold nicely. The last thing we want to do is knock the stuffing out of that,” Mr Haldane told the Daily Post newspaper during a visit to Wales.
“They are historically low and they won’t stay like that forever but when that rise comes it is going to be very gradual. It could be half a per cent a year for several years.”
The Bank of England has kept interest rates at a record low 0.5 per cent for nearly six years since the depths of the global financial crisis.
Mr Haldane, who sits on the Monetary Policy Committee (MPC), said the Bank was clear that it did not foresee interest rates returning to the high levels of the 1980s or 1990s.
“Maybe the new normal for rates might be 2 per cent or 3 per cent, maybe 4 per cent.”
Last week, Governor Mark Carney said interest rates would need to rise over the course of the next three years to stop inflation from overshooting the Bank’s 2 per cent target.
And in remarks published on Monday, MPC member Kristin Forbes said interest rates may rise sooner than many people expect if inflation rebounds strongly after its recent sharp fall.
Mr Haldane said the signs around the British economy were positive.
“No one is saying we are in a boom and that they are seeing runaway growth. But is it good growth, resilient growth? Yes.”
Mr Haldane grew up in Leeds and studied A-level economics at the comprehensive Guiseley School.
He read economics at Sheffield University and joined the Bank of England in 1989. Mr Haldane rose through the ranks and in 2009 was appointed executive director for financial stability. He became chief economist last year.