McCafferty urges BoE not to dally in making its next move

In his last scheduled speech before the end of his final term, the Monetary Policy Committee's Ian McCafferty said that the Bank of England should not dally in raising interest rates.

McCafferty, long one of the MPC's most hawkish members, argued that a "modest" tightening in policy was needed over the course of the next three years.

More specifically, and given the shape of the interest rate curve on which those forecasts were predicated, he indicated that that meant roughly three hikes over that same time horizon.

Under his central forecast, the UK economy would move into excess demand within two years, while the labour market was already hitting so-called 'full employment'.

The policymaker also pointed out how at 4% at the turn of the previous year, the rate of growth in global GDP was now just shy of the average 4.3% pace seen over 2001 to 2007.

So too, since the summer of 2017, global trade growth had averaged 5%, versus the 5.9% clip seen between 2001 and 2007.

Looking forwards, to some of the most important questions that policymakers would be facing, McCafferty said the "real challenge" would lie in distinguishing between changes in the economy as some of the economic issues that had afflicted the economy during the crisis faded and the fundamental underlying transformations that it was undergoing.

Commenting on McCafferty's Valedictory speech, Andrew Goodwin at Oxford Economics said: "That McCafferty will again vote for higher interest rates in August is virtually a foregone conclusion and, provided that the monthly GDP data evolves in line with our expectations, we expect at least two of his fellow Committee members to switch their votes and allow him to sign off with a rate hike."