Haldane expects to vote for rate rise this year

Andrew Haldane, Chief Economist of the Bank of England

Bank of England chief economist Andy Haldane says he may vote for a rate rise in the second half of the year.

He said leaving a rate hike until too late risks steeper rate rises in the future.

Sterling briefly pushed above $1.27 after his comment, having dipped below $1.26 prior to Wednesday's Queen's Speech.

Mr Haldane's comments are at odds to those made by Governor Mark Carney.

On Tuesday Mr Carney said "now is not yet the time to begin" rate rises.

In August last year the Bank cut interest rates to 0.25% after signs of a slowdown following the Brexit vote.

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Image caption Bank of England chief Mark Carney said now is not the time to start raising rates

But, in a speech in Bradford, Mr Haldane said: "Provided the data are still on track, I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year."

Mr Haldane said the risk of moving too late with a rate hike had grown, after UK economic growth and inflation had proven more resilient than expected.

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However, Mr Haldane said he had not voted for a rate rise in June due to there being "few signs of higher wage growth" and the "chance of a sharper than expected slowing in the economy".

Both are reasons for monetary policy "not to rush its fences," he said, adding that the general election "has thrown up a dust-cloud of uncertainty".

"It is unclear what twists and turns lie ahead, with potentially important implications for asset prices and, at least potentially, confidence among businesses and consumers.

"I do not think adding a twist or a turn from monetary policy would, in this environment, be especially helpful in building confidence, at least until the dust-cloud has started to settle," he said.

Weak wages

In his speech Mr Haldane also examined why UK wage growth has been weak in recent years.

He said that longer-term factors included a decrease in unionisation and an increase in self-employment, flexible and part-time working, and zero-hours contracts.

He said technology and globalisation "may have weakened the bargaining power of workers".

He added that "the impact of the financial crisis on slack in the labour market" was also a factor.

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