If the UK moves out of the European Union smoothly, then the Bank of England has room to hike interest rates in a limited and gradual manner, Deputy Governor Dave Ramsden told Bloomberg News in an interview.
“The kind of guidance we’ve been giving — in the world of a deal it still applies,” the banker said.
“We’re not saying over what timeframe, but limited and gradual is a reasonable qualitative framing,” said Ramsden.
Prime Minister Boris Johnson and European Commission President Jean-Claude Juncker reached a new Brexit deal on Thursday. However, the proposed deal is expected to face stiff opposition in parliament when it is put to vote in the House of Commons on Saturday.
According to Ramsden, a transition agreement and clarity for U.K. businesses will bring some pickup in investment, which in turn would boost demand and productivity over time.
However, earlier this week, BoE policymaker Gertjan Vlieghe said rate hikes would only eventually come back on the agenda if a Brexit deal is struck and that stimulate investment sufficiently to prevent the need for easier monetary policy.
Vlieghe said entrenched Brexit uncertainty is likely to keep economic growth below potential, and require some monetary stimulus.
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