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Bank of England Saunders: Prepare for rate rise

Staff Writer |
Bank of England Monetary Policy Committee member Michael Saunders warned that UK households should prepare for interest rates to rise, after he voted to raise rates late month.

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Saunders was one of the three who voted in favour of a 25 basis point increase, against the five including Governor Mark Carney who voted to hold the interest rate at a record low of 0.25%. Since that vote, both chief economist Andrew Haldane and Carney have suggested they are more open to an interest rate increase.

Speaking with the Guardian newspaper, Saunders said the UK economy had confounded gloomy forecasts following the referendum, and warned inflation would climb higher and stay well above the bank's target for longer without action.

"I think households should prepare for interest rates to go higher at some point. But if rates do go up, it will be in the context of the economy doing OK and unemployment being low and probably falling," he said.

"At the moment, in monetary policy terms if you like, our foot is pretty much on the floor with the accelerator. Record low policy rate, large stock of quantitative easing, and I don't think the economy needs as much stimulus as that," Saunders said.

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