A second member of the Bank of England's Monetary Policy Committee, David Miles, has hinted that the central bank could be heading towards increasing interest rates. The outgoing MPC member told BBC Newsnight on Tuesday (18 August) that he expects the committee to raise rates "pretty soon". The comment comes after fellow MPC member Kristin Forbes also said she thinks keeping rates low for too long can be risky.
Miles said: "My last meeting was a couple of weeks ago and I thought there was a case for actually starting that slow journey back to more normal interest rates then. That is not something we need to hurry into but I think the time is coming. But is not anything to worry about, it's a sign of health."
He will be leaving the MPC after the committee's August meeting and although he has been considered a policy "dove", his tone has become increasingly hawkish recently. In early July, he said: "I think the case for beginning a gradual normalisation in the stance of monetary policy is stronger than at any time since I joined the committee over six years ago."
Inflation nudged up in July and UK GDP has grown in the first two quarters in 2015. However, analysts have said that because growth is more sluggish than expected, a rate increase would not be appropriate until early 2016.
The Institute of Directors has said near-zero inflation should not be a reason to hold off an increase in interest rates for too long. "It is important that a low headline rate of inflation does not stand in the way of normalising interest rates," chief IoD economist James Sproule said. "It is right that Mark Carney has committed to increasing them at a 'slow and gradual' pace. The sooner he acts, the more able he will be to keep the course of rate rises in check."
Financial information provider Markit's Household Finance Index shows almost half of UK households expect a rate increase within six months.