Huw Pill made the suggestion in an online question-and-answer session run by the Bank of England.
However, he warned that interest rates are unlikely to return to the record low levels seen during the 2010s, saying that interest rates would likely settle at a level that’s “below where we are” but probably “higher than the interest rates that we had in the pre-Covid era”.
Pill pointed out that in the aftermath of the financial crisis, the Bank of England had to be “supportive” of the economy as a whole otherwise it would be “slowed down to a halt”.
He said: “We’re now in an exceptional period, if you like on the other side, responding to the higher gas prices and the invasion of Ukraine. Hopefully, when all this washes out, we’re in a normal period and the normal period will be somewhere between those two places.”
The base rate was below one per cent for the entire period from May 2009 to March 2022. It stood at an all-time low of 0.1 per cent from March 2020 to December 2021 during the Covid pandemic.
The base rate has been rising steadily since December 2021 and now stands at 5.25 per cent. Financial markets are currently pricing in a cut next June to take the Bank rate to five per cent.
Inflation is currently at 6.7 per cent, more than three times the Bank’s two per cent target, but Pill predicted a rapid fall in the coming months.
He said: “We’re going to see the UK get down to levels more comparable to what we’re seeing in the rest of the world in pretty short order.
“Rates will hopefully come off their current levels as long as we return inflation to target. Equally we shouldn’t anticipate they’ll go back to zero in a very lasting way. The situation that created rates at zero pre-Covid was an exceptional situation too, so they’re going to be somewhere in between.”
