BOE's Broadbent Says Rate Path Slightly Higher Than in November

(Bloomberg) -- Improvements in the economy mean the path for U.K. interest rates is slightly higher than the Bank of England saw in November, according to Deputy Governor Ben Broadbent.

While he reiterated than any moves would be “limited and gradual,” he echoed BOE Governor Mark Carney’s comments on Thursday that rate increases may come slightly sooner than anticipated.

In a BBC radio interview on Friday, Broadbent said:

“We’ve had a little better news on the economy. We’ve had some uptick in wage growth that was of course very welcome. We expected to see that but we’re now more confident that process is happening. And some positive news on employment. And all that has meant is that we pushed up our forecasts so it’s likely that the path of interest rates required to get inflation back to target over the medium term is itself slightly higher. But there’s nothing terribly dramatic going on here.”

Broadbent, who alongside his colleagues on the Monetary Policy Committee voted this week to keep the benchmark rate at 0.5 percent, said the worst may be over for British consumers. They’ve been hit with rising prices fueled by the pound’s post-Brexit referendum slide, and pay growth failed to keep pace.

“The worst of the squeeze was about year ago. If you look at real incomes in second half of last year, they were flat and if you ask me what happening right now, in the first quarter, I think they are starting to rise. The squeeze from that depreciation has come off.”

Even so, Broadbent refused to give any clearer promises on the policy outlook as the U.K. enters the final year of its divorce negotiations with the European Union.

“We meet eight times a year and the reason we do that is because stuff happens. We do not set interest rates in advance.”

--With assistance from Fergal O'Brien

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Brian Swint, Zoe Schneeweiss

©2018 Bloomberg L.P.