Interest rate could settle at 3%, says BoE deputy governor

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The official UK interest rate could settle at an average of 3% in a few years, the outgoing deputy governor of the Bank of England has predicted.

Charlie Bean (pictured) suggested it was likely to reach that level between 2017 and 2019, the BBC reports.

The rate has been at the historic low of 0.5% since March 2009 and the Bank's governor has indicated it will not start rising before next spring.

But Bean told BBC Radio 4's The World This Weekend there were economic advantages to beginning earlier.

The UK interest rate fell to 0.5% in the wake of the worldwide financial crisis in 2008. It has been kept at that level amid concerns that the finances of many individuals and businesses remain too weak to withstand a rise.

But recent worries about rising house prices in parts of the UK and evidence that the economy is strengthening have intensified the debate over when rates might start to increase.

"The bank rate averaged about 5% in the decade or so before the crisis," Bean told the BBC.

"It's reasonable to think that given the headwinds that are still out there as well as some the global forces that perhaps the level that we go to three or five years out might a couple of percentage points below that," he said.

At the last meeting of the Bank of England's Monetary Policy Committee (MPC) on 7-8 May, members appeared to be shifting their opinions towards raising interest rates.

However, notes from the meeting showed that they voted unanimously to keep rates at a record low of 0.5%.

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