Bank of England's Haldane warns against moving too fast with any rate hike

[LONDON] Bank of England chief economist Andrew Haldane said on Friday it would be risky to raise interest rates too hastily and that he was comfortable with the BOE's recently adopted neutral stance on the future direction of monetary policy.

Britain's central bank is grappling with the effect of a sharp fall in sterling since June's vote to leave the European Union, which Mr Haldane said was likely to have a significant impact on growth and inflation over the coming year.

Last month the BOE said it no longer expected to cut rates again this year - changing its message from August - as the economy had slowed much less than it had forecast after the immediate shock of the vote to leave the EU.

"That ... now leaves me comfortable with the current stance of monetary policy, with no bias on the direction of the next move in interest rates," Mr Haldane said in a speech at an iron and steel research centre in northeast England, the Materials Processing Institute.

"Consistent with that, my subjective distribution of risks around these projections is now symmetric," he added.

However, Mr Haldane said he was concerned that interest rates are so close to zero that it would be difficult to cut them much further to provide extra stimulus if the British economy slows unexpectedly.

"My personal view is that this provides grounds for not proceeding too hastily with any tightening of the monetary policy stance," he said.

Another BOE policymaker Gertjan Vlieghe said on Monday he believed it was better to act with caution about any tightening of monetary policy.

Private sector economists do not expect a BOE rate hike in the foreseeable future.

Mr Haldane also said on Friday he saw a risk that higher inflation next year - as the effect of the fall in sterling feeds into consumer prices - could hurt consumer spending more than expected.

A further rise in market inflation expectations could also be unwelcome, he added.

REUTERS