Gertjan Vlieghe, probably the most dovish member of the Bank of England's Monetary Policy Committee made the comments in a speech in London on Friday.
LONDON — Gertjan Vlieghe, probably the most dovish member of the Bank of England's Monetary Policy Committee (MPC) believes that the bank may need to raise interest rates "in the coming months," making the first hike in more than 10 years more likely than ever before.
Speaking at the annual conference of the Society of Business Economists, Vlieghe said that if the current "data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth" continue as they are, the bank could raise rates in the short term.
Here is the key extract from his speech, titled "Real interest rates and risk":
"For now, it seems the net effect of the many underlying forces acting on the UK economy is that slack is continually being eroded and wage pressure is gently building.
"If these data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth continue, the appropriate time for a rise in Bank Rate might be as early as in the coming months."
Normally, one member of the MPC giving their views on interest rates would not likely signal a big shift for the bank, but Vlieghe has been continually downbeat on the prospects of interest rate hikes, so his intervention is a very clear sign that the bank is close to hiking.
The comments come less than 24 hours after the bank's Monetary Policy Committee said that "some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target."
The pound had already hit a one-year high on Friday morning following the MPC's words. Vlieghe's comments have sent even higher.
By 10.15 a.m. BST (5.15 a.m. ET), the pound is up by close to 1% against the dollar, climbing above $1.35, as the chart below shows: