Ian McCafferty, who will step down from the Bank’s monetary policy committee (MPC) at the end of the month, said UK savers should get used to interest rates well below the 5 per cent average that marked the decade before the downturn.
“It is too much to say never, that we won’t ever go back,” he told The Guardian. “But there is a 20-year horizon under which there will be factors keeping it low. Interest rates are going to be significantly below the 5 per cent average in the first 10 years (1997-2007) of the MPC.”
Mr McCafferty said factors holding rates back, including weak productivity, would eventually go into reverse.
However, he added that while interest rates would continue to increase following last week’s hike, growth will be limited and gradual, underlining the MPC’s guidance.
Mark Carney, the central bank’s boss, said the base rate could increase to 1.5 per cent over the next three years, and added that it would not reach pre-crisis levels for some time.
“We don’t see it getting anywhere near back to that level for a long time … not for the foreseeable future,” he said.
“That’s because there’s some big structural changes in the UK and global economy.”
Last week, the MPC noted that “the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal”.
Mr McCafferty said Brexit uncertainty had affected businesses much more so than consumers, with investment weaker than it would have been if the UK were not leaving the EU.
He has consistently been one of the more hawkish members of the MPC, voting in May against the majority, in favour of raising interest rates to 0.5 per cent.
He is to be replaced by productivity specialist Jonathan Haskel when he leaves. The appointment of Mr Haskel caused controversy when it was announced, raising concerns about the gender balance of the MPC, which is currently made up of eight men and one woman.
The Treasury said it had interviewed five candidates for the position, four of them women.