LONDON (REUTERS) - One of the Bank of England's policymakers who is considered most likely to call for higher interest rates believes the need for tighter monetary policy is "slightly less immediate" because of slow pay growth and falling oil prices, a newspaper reported.
Martin Weale, one of two BoE rate-setters who pushed in vain in late 2014 for higher borrowing costs, told the Daily Telegraph that the factors pushing down on inflation had "become a bit more prolonged" and the Bank of England had more"breathing space."
"I initially thought that the weak wage growth was a wobble that represented stray numbers that you get once or twice from time to time. There has plainly been something more to it than that," Mr Weale said in an interview with the newspaper.
Britain's economy has grown strongly over the past two years and unemployment has fallen sharply. But inflation is almost at zero and wage growth remains far from its levels before the financial crisis.
Data last week showed earnings rising at their weakest pace since early 2015 and more slowly than the BoE had expected.
Mr Weale said he believed earnings would pick up as the labour market tightens and interest rates would probably have to rise sooner than financial markets currently imply.
Financial markets suggest the BoE will not raise rates until late 2016 or early 2017. Most economists taking part in a Reuters poll predicted the first hike will come sooner, possibly in May, although last week's weak wage data prompted some to say that their forecasts might have to be pushed back.
A planned referendum on Britain's membership of the European Union, which the government has said it will hold within the next two years, could also become a factor for the BoE if uncertainty over its outcome hurts investment and slows growth.
Mr Weale is among the eight rate-setters at the Bank who have voted to keep rates at their record low of 0.5 per cent, where they have been since early 2009. Only one policymaker has voted to increase Bank Rate.
He told the Daily Telegraph that the full impact of interest rate rises could influence the economy "a little bit earlier" than the 18-24 month horizon seen by some economists. "It's just another of the things that makes the need (to raise interest rates) slightly less immediate," he said.
While it was reassuring that markets had reacted calmly to last week's first rate hike in nearly a decade by the US Federal Reserve, Weale also said sterling's strength against the euro was a big factor, the Daily Telegraph said.