LONDON (Reuters), Bank of England policymaker Michael Saunders stated that the neutral rate of the interest – the point at which it neither stimulates or restrains demand – might lie somewhere between 1.25% and 2.5%. It is higher than current Bank Rate of 1.0%.

Saunders answered questions following a Monday speech delivered at Resolution Foundation thought tank. He stated that the financial market was pricing the Bank Rate in this range over the next five-years.

He stated, “I tend to believe that a neutrrate interest rate, taking into account the signal from financial market – although I don’t wish to endorse it too strongly. That is consistent with that idea that a neutral rate is somewhere between that range.”

Saunders, along with two members of the nine-strong Monetary Policy Committee (BoE), voted last week to increase Bank Rate by 0.75% to 1.255%. However, a majority six of the members supported a lower increase to 1.0%.