Britain's Osborne re-appoints McCafferty at Bank of England

(Adds background, Carney comment)

LONDON, May 20 (Reuters) - British finance minister George Osborne said he had appointed Ian McCafferty to serve a second term on the interest-rate setting panel of the Bank of England where he has been an advocate for raising borrowing costs.

McCafferty's second term as an external member of the MPC will begin Sept. 1 and last until Aug. 31, 2018, Osborne said in a statement on Wednesday.

McCafferty was one of two members of the nine-member MPC (KOSDAQ: 050540.KQ - news) who voted for an increase in interest rates in the final months of 2014 before re-joining the majority voting to keep rates on hold at the start of this year as inflation plunged.

He and fellow MPC member Martin Weale are expected to resume voting for a rate hike later this year.

Osborne also said he would soon start the search for a replacement on the MPC for David Miles, whose term at the Bank expires at the end of August.

Miles called strongly for the provision of extra stimulus for the British economy in the form of government bond purchases by the Bank of England after it had cut interest rates to a record low of 0.5 percent.

BoE Governor Mark Carney welcomed the reappointment of McCafferty and said Miles had been a powerful voice at the Bank during some the most difficult times in British economic history.

"His knowledge and experience have played no small part in supporting the recovery we see today," Carney said.

Carney and Osborne made several new appointments to the MPC last year, bringing in new members including two women as part of a series of changes at the Bank that Carney has run for nearly two years.

(Writing by William Schomberg; Editing by Tom Heneghan)