Bank of England’s Vlieghe warns of consumer slowdown, reiterates need for caution on interest rates

Speaking at Bloomberg’s European headquarters in London on Wednesday, Bank of England (BoE) policy maker Gertjan Vlieghe said that there is no need for interest rate rise soon. He warned that consumer finances are increasingly squeezed and the rise in inflation appears temporary.

Vlieghe, an external member of the BoE’s rate-setting committee, suggested financial markets had overestimated the chances of an interest rate rise in the year ahead. He warned that slowdown in U.K. is more likely to intensify than fade away.

Mr Vlieghe said wages showed “no sign of sustained upward momentum yet”, suggesting that “despite better than expected growth, we have not had higher-than-expected underlying inflation pressure”. He warned that consumers who have been the powerhouse of economic growth are starting to slow their spending and businesses could have a greater reaction to uncertainty as Britain moves closer to leaving the European Union.

With the benchmark rate at a record-low 0.25 percent and asset purchases “an imperfect substitute,” the BOE’s nine-member policy setting committee has less room to ease measures than to tighten, said Vlieghe.