[LONDON] The recent sharp fall in oil prices should not be seen as a signal of where inflation will be in a couple of years' time, according to a Bank of England policymaker who has been voting for a hike in interest rates.
"What we have seen over the last few months is a very sharp fall in oil prices that has a direct first-round effect on the rate of inflation," Martin Weale told BBC radio in an interview broadcast on Monday.
"But it's a separate issue to where inflation is going to be in, say, two years' time." Mr Weale and fellow rate-setter Ian McCafferty are the only two members of the BoE's nine-strong Monetary Policy Committee to have voted for an increase in interest rates in recent months.
The Bank has signalled it does not expect to raise rates until well into 2015 as it sees little pressure on inflation, which looks set to fall further below the 12-year low of 1 per cent it touched in November.
Mr Weale noted that oil prices had fallen further since the MPC's most recent meeting in early December but data had also shown wage growth was picking up a bit faster than he had expected. "Pay increases are a good thing," he said. "But if the underlying rate of pay increases picks up very sharply, then that does lead to inflationary pressure." He also said he expected to see some productivity growth in 2015 while the fall in oil prices would help consumer spending.