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BoE's McCafferty welcomes market shift to "late 2017" rate rise

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BoE's McCafferty welcomes market shift to "late 2017" rate rise

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LONDON (Reuters) – The change of view by investors who now expect a Bank of England interest rate rise later this year, rather than in mid-2019, has reduced the risk of “an unpleasant surprise”, BoE policymaker Ian McCafferty said on Thursday. McCafferty, who has voted for a rate rise since June, said financial markets had wrongly regarded the BoE’s hands as being tied by Brexit uncertainty until the BoE said in September that most policymakers expected rates to rise in the coming months. “This has had the effect of bringing forward expectations of the first rise in Bank Rate from mid-2019 to late 2017, reducing the risks of an unwelcome surprise,” he said in a speech to a business audience in London. McCafferty said interest rates would need to rise “several times” before the start of the sale by the BoE of its 435 billion pounds ($571 billion) of gilt purchases became an issue, and that the effect of such sales might be limited. “The transmission channels and the multipliers on the way out are unlikely to be equal and opposite to those on the way in, given that financial markets are less dysfunctional and the signalling channel present at the onset of QE,” he added.

(Reporting by David Milliken; Editing by William Schomberg)
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