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Bank of England is in no rush on rates hike, says boss

By Holly Williams

Published 20/01/2016

Speech: Mark Carney yesterday
Speech: Mark Carney yesterday

Bank of England governor Mark Carney has said policymakers are in no rush to raise interest rates amid a weakened world economy and slowing UK growth.

Mr Carney added now was "not yet the time" to lift the measure from its historic low of 0.5% following falls in oil prices and a Chinese growth slowdown.

In a speech at Queen Mary University of London, the Bank of England governor insisted a rise would "depend on economic prospects, not the calendar".

The outlook has changed dramatically since last summer's prediction that the decision to raise rates would come into sharper relief at the turn of the year, Mr Carney explained.

"The world is weaker and UK growth has slowed," he said. "Due to the oil price collapse, inflation has fallen further and will likely remain very low for longer."

The bank chief also warned that "unforeseen disturbances" meant the path for interest rates "cannot be preordained".

"That means that we'll do the right thing at the right time on rates," he said.

Mr Carney told how policymakers needed to see faster economic growth, higher pay and more core inflation before deciding to increase rates.

"Progress in all three will increase confidence that the initiation of limited and gradual rate increases will be consistent with returning inflation sustainably to target," he told the audience at Queen Mary's.

He said the UK's economic growth over 2015 had "disappointed", averaging 0.5% per quarter against its earlier expectations of 0.7% per quarter.

He added that the outlook for the global economy may weaken further in the future, in particular due to China and other emerging market economies.

Chinese trade had been "strikingly weak" recently, he warned, with the UK hit hard by a slump in demand for overseas exports.

British exports to China have dropped by a third in the year to November.

The pound sunk to a seven-year low against the US dollar, to $1.42, after the speech as Mr Carney pushed back further the prospect of an interest rate hike.

One economist said the Bank could delay action on interest rates until "very late on in 2016, or even 2017".

Belfast Telegraph

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