There is less slack for growth in the UK economy than the Bank of England has previously forecasted, according to one of its senior rate-setters.
Martin Weale, an external member of the central bank’s Monetary Policy Committee said Britain looks set to run out of spare capacity, meaning interest rates will need to rise significantly in the next couple of years.
The Bank of England estimated there was 1.5% spare capacity in the economy, however Weale thinks it’s more like 0.9%.
“While I expect interest rates to remain low over the next two to three years, it is not possible to guarantee this,” Weale said at a small business event in Windsor.
“I think the forecast is broadly consistent with slack being used up over the next two to three years while the collective judgement of the committee was that slack would remain at the end of that period.”