Bank of England Chief Economist Spencer Dale Said that Officials Should Raise Interest Rates to Bring Inflation Under Control

The Bank of England

As reported by Bloomberg’s Craig Stirling:

Bank of England Chief Economist Spencer Dale said that officials should raise interest rates to bring inflation under control even if Britain’s economic recovery isn’t yet assured.

“I’m not at all confident that the recovery has taken hold and will definitely power away,” Dale said in an interview with the Financial Times published today in London. “However, I’m even more worried about what’s going on in terms of inflation.”

Inflation accelerated to 4.5 percent in April, the fastest since 2008, forcing Bank of England Governor Mervyn King to explain publicly why officials have yet to raise borrowing costs from a record low of 0.5 percent. Dale has voted for interest- rate increases since February and helped compile forecasts this month using investor expectations that showed the benchmark will rise once this year and reach 3 percent in 2014.

“That sort of broad path” for rates “didn’t look wholly improbable,” he said. Still, “what we know is things will change and the economy will evolve differently” and “as a result the interest-rate path will differ as well.” A Bank of England spokeswoman confirmed Dale’s comments and said he wasn’t making forecasts for rates.

Dale began calling for higher interest rates after the bank completed its first quarterly predictions of the year in February, joining Andrew Sentance and Martin Weale. Data since those forecasts has showed inflation continuing to accelerate, while the economy stagnated in the past two quarters.

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