BoE's Forbes says must take care communicating timing of rate hikes

LONDON (Reuters) - The Bank of England must take care how it communicates when interest rates will rise, given the risk of sharp market reactions if traders are wrongfooted, incoming policymaker Kristin Forbes said on Wednesday.

Forbes also said a premature adjustment in interest rates could slow the economic recovery and reiterated the BoE's message that monetary policy was the last line of defence against financial stability risks.

"The first risk is if you act too quickly and it was too much (of a) surprise. We saw first hand in the United States what could happen in the spring of last year when members of the Fed (U.S. Federal Reserve) started to talk about tapering at some point in the future," she told a parliament committee.

"We have learned that lesson, you need to prepare for this gradually. But at the same time if markets believe interest rates will not be adjusted at any point, then there is tendency for investors not to assess the risk or not to adequately prepare for when rates do start to move."

(Reporting by Ana Nicolaci da Costa Li-mei Hoang; Editing by Andy Bruce)