Challenging times ahead warns policymaker
Spencer Dale, one of the Bank of England’s Monetary Policy Committee (MPC) members, has warned that rising inflation is a “significant risk” to the UK economy.
Mr Dale, who is the Bank of England’s chief economist, said the UK can expect some tough times ahead over the next few years and said he is “not confident about the strength of the recovery”.
Speaking to the BBC, he acknowledged that subdued growth and higher inflation pose a threat to the recovery.
At the last four rate-setting meetings, Mr Dale has voted for interest rates to be lifted from their historic low of 0.5% to combat stubbornly high inflation.
However, he remains in the minority, along with Andrew Sentance and Martin Weale, who continue to vote for higher rates.
The remaining MPC members have been reluctant to vote for higher rates suggesting the economy is too fragile, despite calls from leading business group to hike rates to curb inflation – which at 4.5% – is more than double its target.
His interview comes shortly after fellow policymaker, Adam Posen, said the Bank of England is right not to have raised interest rates.
In March, Posen said he believed inflation will plunge to 1.5% by the middle of next year.
The American economist is so certain of his prediction that, at the time, he threatened to step down from the Committee, when his three-year term ends in August 2012, if his forecast is wrong.
Many economists do not expect inflation to fall back to target until late 2012.
Last week, Andrew Sentance reiterated that the bank faces losing its credibility if it is not seen to be fighting inflation.