Bank of England deputy says Brexit can’t delay rate hikes

Ben Broadbent
Ben Broadbent

The Bank of England cannot be expected to delay interest rate hikes in light of Brexit, a deputy governor has warned.

Ben Broadbent - a member of the interest rate-setting Monetary Policy Committee (MPC) and deputy governor of monetary policy - says that markets have put too much weight on Britain’s divorce from the EU when it comes to considering whether an interest rate rise is appropriate.

“There’s been a persistent strain of opinion that EU withdrawal is something that necessarily means lower interest rates, or at least that it’s a reason to avoid putting them up,” he said in a speech prepared for the London School of Economics.

“If so, then I think the belief has been overdone.”

Mr Broadbent was among the seven MPC members who voted to increase interest rates from to 0.5% this month, reversing a cut to 0.25% in the wake of the Brexit vote and marking the Bank’s first hike in a decade.

Only two members voted to keep interest rates at record lows.

The deputy governor has since said he anticipates a “couple” of further hikes as part of measures to get inflation, which is currently at 3%, back on track and closer towards the Bank’s 2% target.

However, he stressed that while Brexit was not a reason to delay an increase to interest rates, additional hikes are not inevitable.

“It’s not that the opposite is true. I’m certainly not going to argue here that interest rates will inevitably rise as Brexit proceeds. Apart from anything else, it isn’t the only show in town.”

Mr Broadbent said it was important to recognise that economic shocks “come along all the time”, and that even the “marginal impact” of Brexit on what the appropriate level of interest rates should be, is “ambiguous”.