Bank of England policymaker Kristin Forbes said that UK interest rates may need to be raised earlier than many expect as falling oil prices could boost consumption and investment.
In an interview to the Wall Street Journal, Forbes said robust growth in the U.S. and cheaper oil could benefit consumption and investment growth, which will strengthen the case for raising the interest rate from a record low 0.50 percent, earlier than expected.
The UK central bank is widely expected to raise interest rates by the middle of 2016. The central bank targets inflation of 2 percent. Headline inflation eased to 0.5 percent in December.
Forbes, an American economist who is an external member on the BoE's Monetary Policy Committee, told the Journal that inflation is likely to fall more sharply in the short term. She also said growth will gain momentum, boosting inflation more in the medium term.
According to the policymaker, wage growth could be another factor pushing inflation higher. She expressed concern that the slack available in the economy may be less than expected to avoid pay and price pressures as the number of those ready to join the labor force may be smaller than the BoE estimates.
Further, Forbes said the economy may respond in unexpected ways even as the BoE's exit strategy involves raising rates slowly and incrementally. When the change comes, policymakers will be careful in communicating it and consider the risks, she added.
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May 01, 2026 15:54 ET Central banks dominated the economics news flow this week with almost all major ones announcing their latest policy decisions and many boosted expectations for a rate hike in June. In other news, several countries released the preliminary data for first quarter economic growth. In the U.S., comments by Fed Chair Jerome Powell were also in focus as his term ends this month.