BOE signals change of heart on rate increase

Bloomberg

Bank of England Deputy Governor Dave Ramsden looks to have changed his mind on interest rates. An opponent of a rate increase in November, Ramsden told the Sunday Times in an interview that an acceleration in wage growth suggests swifter rate rises are now required. Ramsden said he’ll closely monitor what happens in the early part of 2018 to see if a forecast of wage growth picking up to 3 percent is realized.
“But certainly relative to where I was, I see the case for rates rising somewhat sooner rather than somewhat later,” Ramsden told the Sunday Times.
The pound has rallied since the BOE hiked rates in November for the first time in a decade, with money markets now pricing in about an 85 percent chance of another rise this May. For some sterling bulls, the potential boost from the BOE’s hawkish policy shift is beginning to eclipse the drag from Brexit risks.
Ramsden said in a speech that clarity over the UK’s future trading arrangements with the European Union could reduce uncertainty, boosting investment and ultimately productivity growth. He also cited evidence from a BOE survey showing that Brexit may hold back investment less in 2018 than it did last year.
“I still think Brexit is bearing down on the labor market but I’m more confident than I was that wages are picking up,” Ramsden said in the interview.