Bank of England Dove Says Raise Interest Rates Soon

 
   By Jason Douglas 
 

        The Bank of England should begin raising interest rates in the U.K. soon in order to keep future increases in borrowing costs smooth and steady, one of the central bank's nine rate-setters said Tuesday.
        Monetary Policy Committee member David Miles said in a speech in London that waiting too long to start raising rates would be "a bad mistake."
        "The time to start normalization is soon. That is not something to shrink from," Mr. Miles said in a speech to the Resolution Foundation, a nonpartisan think-tank focused on living standards.
        Mr. Miles' comments are significant as he is usually regarded as among the most dovish of officials on the MPC, suggesting others on the panel may also favor raising interest rates sooner than expected. Investors predict central-bank officials won't begin raising rates until mid-2016.
        Yet Mr. Miles is unlikely to be on the MPC when the panel does raise rates, as he has just one month left as a member. The second of his two three-year terms comes to an end in August.
        Unless he voted for a rate increase in July or votes for one next month, he will be unique among MPC members since the BOE gained independence on monetary policy in 1997 in that he will never have voted for an interest-rate increase throughout his MPC career. The breakdown of this month's policy vote will be published July 22; next month's meeting takes place Aug. 6.
        Mr. Miles said in his speech that raising rates soon would lessen the risk that policy makers need to raise rates more drastically in future to keep inflation in check, which could hurt borrowers and slow the economy.
        "What you really need to avoid is a sharp rise in interest rates," he said.
        A rate rise soon would help officials ensure "a gentle amble" back towards a more normal setting for monetary policy after six years in which the BOE's benchmark rate has been pinned at 0.5%, the lowest level in the central bank's 321-year history, he said.
        His speech, his last formal address as a rate-setter, also touched on the banking sector. Mr. Miles has long said banks should finance lending with more equity and less debt to lessen the risk of financial crises. He said Tuesday that he thinks minimum equity requirements for banks in the U.K. are still too low.
        Write to Jason Douglas at Jason.Douglas@wsj.com
        (END) Dow Jones Newswires

        July 14, 2015 13:15 ET (17:15 GMT)

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