Bank of England deputy governor Minouche Shafik speaks at the IoD

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Bank of England deputy governor Minouche Shafik speaks at the IoD

The Federal Reserve has raised interest rates in the US by 0.25 percentage points, a move which many economic commentators think opens up the door to the Bank of England doing the same over here, writes Edwin Morgan, the IoD’s head of media relations…

These are challenging times for members of the Bank of England’s Monetary Policy Committee. In a constantly changing world, with data flooding in from all sides, they have to decide whether the economy is too hot, or too cold. Whether the financial sector is in good health, or heading for a fall. They have to decide how to use the tools at their disposal, whether that’s interest rates, quantitative easing or regulation.

And they have to do all of this under the constant spotlight of media attention, where words move markets. Central bankers have to have cool heads, and few come cooler than Minouche Shafik, deputy governor of the Bank of England, who spoke at the IoD’s 116 Pall Mall headquarters earlier this week.

After a career which has seen her take top roles at both the IMF and the World Bank, as well as a spell as permanent secretary at the Department for International Development, Shafik (pictured above, left, with IoD chairman Lady Barbara Judge) has a wealth of knowledge in international markets and finance. She drew upon this experience in a wide-ranging speech on monetary policy, telling IoD members how she read the current state of the UK economy, and what conditions she thought would justify a long-awaited rate rise.

There are promising signs the economy was returning to normal, with the labour market tightening,  investment recovering, and productivity growth showing tentative signs of taking off, Shafik said. However, at the moment she felt it was “prudent to tread carefully”, and hold off from raising interest rates until it was certain that wages were growing fast enough.

The exact timing of an interest rate rise in the UK is a hotly debated topic in the media and the City, but it also matters greatly to businesses with loans, and homeowners with mortgages.  The IoD, and its members, will be watching Shafik, and her fellow members of the MPC, with great interest.

About author

Edwin Morgan

Edwin Morgan

Edwin Morgan is interim director general at the Institute of Directors. His team of policy experts covers issues ranging from tax and regulation to trade and infrastructure.

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