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The Financial Times:
Annual FT economists' survey: former MPC members urge rate rise

1 January 2015

Interest rates must start rising soon, to wean the UK off crisis-era monetary policy, five former members of the Bank of England's rate setting body say. Financial markets are not expecting a first rate rise until late next year and not one of 85 respondents to the Financial Times's economists' survey question on the subject predicted that it would happen before the summer. But when asked what the bank should do, there was a notably different picture: 25 people, including five former members of its Monetary Policy Committee, said rises should come much sooner.

Q: Monetary policy: Oil prices are low, inflation is set to fall below 1 per cent but growth is strong and unemployment falling. When should the Bank of England raise interest rates? And do you think they will?

John Van Reenen, Centre for Economic Performance at the London School of Economics and Political Science
They will probably start raising them next year. They should not do so until we have really locked in growth.

Sir Christopher Pissarides, Regius Professor of Economics, LSE and Associate of the Macro Programme at the Centre for Economic Performance
The bank of England should not rush into raising interest rates because of the impact that it will have on the pound. Inflation is too low to trigger a rise. Barring any surprises interest rates should not be raised unless or the Federal Reserve raises them or inflation rises close to 2%. I would not be concerned about inflation pressures in the labour market for as long as unemployment remains above 5%.

This article was published as part of a series of articles in The Financial Times on January 1, 2015
Link to article here

Related links
Christopher Pissarides webpage
Macro Programme webpage
John Van Reenen webpage
Productivity and Innovation Programme webpage

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