It will take three to five years for borrowing costs to rise to about 3%,
Carney surprised the City when he played down calls for an early increase to rein in the booming housing market when the Bank released its quarterly inflation report this month. "We should remember the economy has only just begun to head back to normal," he cautioned at the time.
Financial markets have priced in a rate rise in March or
Bean, who is leaving the Bank at the end of June after 14 years, told BBC Radio 4's The World This Weekend programme that raising borrowing costs "a bit earlier" than expected would enable the Bank to do it more gradually to minimise the economic pain. He said: "There's a case for moving gradually because we won't be quite certain about the impact of tightening the bank rate given everything that has happened to the economy.
"It might not operate in quite the same way as it did before the crisis. So that's an argument if you like for being a little bit cautious, moving in baby steps to avoid making mistakes. If you want to pursue that strategy you need to start taking those baby steps a bit earlier, otherwise you end up being behind the curve."
His view is shared by some other members on the monetary policy committee, who are arguing that raising rates sooner would lead to a gentler upward slope.
Bean stressed there was no need to raise rates straight away, saying: "Maybe if we nip the recovery too early then we won't see that productivity rebound."
Interest rates were cut to a record low during the global financial crisis. Rising house prices in parts of the
Bean said the lingering economic impact of the financial crisis would mean rates would stay lower than before the credit crunch, settling at about 3% in the next few years.
He flagged up geopolitical risks to the economy including the
Asked about the
"Where the issues really start potentially being worrying is the accumulation of debt. So if there's signs that banks are making loans to borrowers who may not be able to repay . . . whether those households will be able to keep their consumption up if they borrow a lot, then they are reasons why the Bank's financial policy committee might want to take some action to rein things back a bit."
A fellow former deputy governor
Bean said both were "extremely serious charges", echoing comments made by Carney in March. "Any attempt to manipulate markets - whether it's the interbank market through manipulating Libor, the foreign exchange market through trying to manipulate the fix there - for private gain strikes at the integrity of markets.
"Markets can't function properly if people can't trust the actors involved as intermediaries to ensure they behave in an appropriate fashion." He added: "It certainly speaks to the need to be continually vigilant . . . We need to be much more conscious of the scope for misbehaviour as well as complacent behaviour."
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