With inflation falling, the Bank of England deputy governor Minouche Shafik used a visit to Kent to make her views on the direction of interest rates clear. She also met firms at the “forefront” of the recovery.

Against a peaceful backdrop of manicured lawns and ornate fountains in the Eastwell Manor Hotel, Minouche Shafik seems a million miles from the nation’s bustling monetary mecca at the Bank of England.

The Egyptian deputy governor, who speaks three languages, has just met with 12 companies from the county at the estate near Ashford, in a gathering organised by Kent Invicta Chamber of Commerce.

Before heading off on a visit to engineering business MJ Allen in Ashford, she has crammed in a brief interview in one of the hotel rooms, intent on setting the record straight after some unwanted headlines a week earlier.

The Bank of England’s chief economist Andrew Haldane had said interest rates may be cut to zero to avoid the threat of deflation – a declaration at odds with the views expressed by governor Mark Carney.

Pressure to cut interest rates increased last month after the Consumer Price Index said inflation had fallen to zero in February, down from 0.3% the month before, with it expected to dip further in the coming months.

So it was a relief to the Old Lady of Threadneedle Street when Dr Shafik made it clear the “central expectation” of the Bank of England’s monetary policy committee, which sets interests rates, is that the next move will be up.

She said the real drivers behind declining inflation were “temporary and mainly external” – blaming the falling price of oil and increasing value of sterling – and that the underlying level was actually “not that low”.

“The monetary policy committee has rightly said we shouldn’t change interest rates in response to something that is temporary,” she said.

But why come out to Kent to get the message out?

“It’s important for the Bank of England to see what’s happening in the real economy,” said Dr Shafik in her calming but assured voice.

“We have a network of agents across the country who report back to us on local economic developments but it is also important for us to come in person periodically and get a sense of what’s behind the millions of numbers we look at every day.

“Sitting down with local business people and [finding out] the challenges they face and the constraints they are under – and how the recovery is going from their perspective – is really important for the work I do sitting on the monetary policy committee.”

“Kent is in a very interesting location because it is near London and the spill overs of economic activity..." - Minouche Shafik

Confident and clear throughout the interview, she is stumped only once, sitting back in her chair and staring slightly up for a moment when asked what the mood is like in the MPC’s interest rate setting meetings.

“The committee always has a good debate and that’s the brilliance of having a committee,” she said.

“Last month the decision was made easier by the fact we hadn’t had a lot of news. We had just done the February inflation report and there wasn’t much new data.

“It wasn’t as contentious as other discussions have been where we have had lots of new data and conversations about what it meant.”

She admires Kent’s economy, whose variety of industries makes it “more resilient and robust” and puts it at the "forefront" of the recovery.

But she did raise concerns about “bits where unemployment is very high”.

She said: “Kent is in a very interesting location because it is near London and the spill overs of economic activity.

“It also has these fantastic transport links and is the gateway to the rest of the world. It is a cross between a link to a magnet and providing a gateway.

“That must be good for business to be well connected. In that sense it must be a very good place to do business.”

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The Bank of England deputy governor on...

Kent’s businesses
“What’s interesting is Kent has a mix. That ecosystem of firms makes an economy more resilient and robust.”

When interest rates will change
“If inflationary pressures continue and inflation stays below target for a long time we have the option of waiting. We have always said interest rate increases will be gradual and limited. We have considerable discretion about the pace of how gradual and limited that adjustment is.”

Taxing international companies
“It is very hard to do a lot nationally. The ultimate solution will be an international one. Several governments have said they need to work internationally to try and get international agreements to make sure tax burdens are borne out fairly across a company’s activity. Most of the focus has been on working an international consensus on how taxes of major international companies should work. That is the best route to do this because it is very easy to relocate to activities to different jurisdictions without having to move much activity. It is a very tricky complicated area.”