Bank of England boss says two rate rises this year would not be a “great shock”

A steeper path of interest rate rises over the next year would not be a “great shock” to the economy, the Bank of England’s deputy governor said this morning.

Ben Broadbent doubled down on the hawkish message given by the Bank’s monetary policy committee (MPC), of which he is a member, paving the way for a hike sooner than markets had previously priced in.

“It’s likely the path of interest rates required to get inflation back to target over the medium term is itself slightly higher,” Broadbent said in an interview with the BBC.

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The MPC yesterday implied that market expectations of a hike in November this year might not be steep enough, as its new forecasts showed that even three rate moves over the next three years – it assumed only two last November – would not be enough to bring inflation under control.

Broadbent played down fears that a rise in interest rates would damage the economy.

“Doubling interest rates from one half [of a per cent] is not a terribly big rise,” he said. “Nor do I think if there were to be a couple of 25 basis points rises in a year that that would somehow be a great shock.”

Read more: Sterling jumps as Bank of England hints at earlier than expected rate hike

This week’s recent market turmoil, which continued on Wall Street last night, has been prompted in part by fears that central banks will raise interest rates faster than expected in response to higher inflation, but Broadbent said he was not concerned by the falls in stock markets.

He said: “While markets had priced in the very strong growth, in particular growth of profits they had probably not paid sufficient attention to the risk that all that growth might produce a little bit of inflation – which I have to say is welcome. It has been terribly low in the US and in Europe.”

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