LONDON, May 27 Reuters The Bank of England is most likely to begin raising interest rates well into next year, although a move could come earlier in 2022 if the economy rebounds faster than expected, BoE policymaker Gertjan Vlieghe said on Thursday.
Vlieghe said the very rapid growth and pickup in inflation due this year as the economy recovers from the COVID pandemic would not last, but modest tightening of monetary policy was likely to be needed to tamp down inflation over the medium term.
Sterling rose by more than half a cent against the U.S. dollar after the BoE published Vlieghes remarks from a lecture he is giving at the University of Bath.
Most other BoE officials have been more reticent about the likely timing for interest rate rises. Michael Saunders, another external member of the Monetary Policy Committee, hinted on Monday that a rate rise might be 18 months away.
Vlieghe whose term on the MPC expires in August said he broadly agreed with BoE forecasts published earlier this month, though he thought spare capacity created by the pandemic in the economy would prove harder to use up.
In that scenario, the first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter, he added.
The governments furlough programme, which pays the wages of more than 2 million workers, does not expire until Sept. 30 and Vlieghe said it would take time for the true health of the economy until early in 2022….