By Sumeet Desai and Matt Falloon
MANCHESTER (Reuters UK) - The time for holding interest rates steady has passed because recent turmoil in financial markets has worsened the economic outlook, Bank of England policymaker David Blanchflower said in a newspaper interview.
In an article for the Guardian newspaper to be published on Wednesday, the arch-dove Monetary Policy Committee member said the economy was slowing sharply and he would not be surprised if 125,000 people lost their jobs in a single month this year.
"The recent unprecedented developments in both the U.S. and UK financial markets add to my concerns for the well-being of the British people in the months to come. The time for inaction is over," Blanchflower said.
"The well being of the British people will be severely impacted by the increase in unemployment that is surely on its way. The labour market is slowing fast and we need to do something about it."
Blanchflower has consistently called for rate cuts this year, but his colleagues on the MPC have chosen to leave rates at 5 percent since April because inflation is running at more than twice the official 2 percent target.
However, economists think the Bank will lower rates in the next few months as inflation is expected to peak and the market turmoil has increased the risk of a slowing economy heading into an even sharper downturn.
"Overall activity in the economy, however measured, seems to be slowing fast. House prices are falling precipitously and households expect their financial situation to weaken sharply," Blanchflower said.
"I do not rule out the possibility that one or more of the monthly increases in the unemployment rate this year could be as much as 0.4 percent, which would translate to an unprecedented increase of 125,000."
Blanchflower predicted in an interview with Reuters last month that two million people could be out of work by Christmas on the internationally-comparable ILO measure of unemployment.
He voted for a 50 basis point cut in interest rates earlier this month..
(Editing by Jon Boyle)
