Bank of England policymaker Michael Saunders, get ready for early rate rise

The Telegraph newspaper reported that Michael Saunders, Bank of England policymaker, advised households to prepare for “significantly earlier” interest rate increases as inflation pressures the British economy.

Saunders stated that investors had the right to place their bets on faster borrowing costs, with consumer price inflation above 4%. This adds to the possibility that the BoE will become the first central bank to raise rates in a decade.

“I don’t support using code words or stating the intentions of the meeting in advance. Saunders stated that the right time is crucial for making decisions.

“But the markets have priced in an earlier rise in Bankrate than before and I believe that’s right.”

The Monetary Policy Committee, which consists of nine members, voted unanimously last month to maintain rates at 0.1%.

Saunders and Deputy Gov. Dave Ramsden, however, voted to stop the BoE from buying government bonds ahead of schedule.

Saunders stated that markets had priced in a February rate rise by the British central banks and half-priced in an increase in borrowing costs in December.

He said, “I don’t want to make a comment on which one, but it seems appropriate that markets have taken a much earlier path to tighten than before.”

Saunders’ comments came just after Andrew Bailey, BoE Governor, said that inflation exceeding the central bank’s 2.0% target was alarming and needed to be controlled to stop it from becoming permanent.

Bailey stated to the Yorkshire Post newspaper that “we are going to have to have a very delicate, challenging job on our hands” and suggested that we must prevent the thing from becoming permanently embedded as it would be very harmful.


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