BoE's Carney Says Any Rate Rise Must Tie In With Growth

by
The Bank of England will only start to increase interest rates when the economy is operating at closer to full capacity, central bank governor Mark Carney said in an interview broadcast on Sunday.

The Bank of England will only start to increase interest rates when the economy is operating at closer to full capacity, central bank governor Mark Carney said in an interview broadcast on Sunday.

"The path of monetary policy, the path of interest rates is going to be calibrated very carefully to ensure that only when we see sustainable growth in jobs, in incomes and in spending, will we make adjustments," he told the BBC.

On Wednesday the BoE said it would look at a broader range of measures of slack in the economy than just the unemployment rate when considering whether to raise borrowing costs, and that it was in no rush to raise rates.

"We can responsibly take our time and only adjust interest rates once more slack has been cut," Carney said on Sunday.

The BoE said that in the run-up to the publication of its economic forecasts, markets had been pricing in a first rise in interest rates in the second quarter of 2015, and that this was consistent with inflation just below the BoE's 2 percent goal.

Carney also said he was concerned about Britain's history of booms and busts in house prices, but that a government scheme to aid home-buyers, Help to Buy, was not a major factor in boosting prices for now.

"It's still pretty small, it's all outside of London, it's for lower-priced houses, as a whole it's mainly with first-time buyers, so its not driving the housing market, but we have a responsibility to watch it," he said.

Carney said the BoE would state publicly, and on its own timetable, if it became unhappy about the financial stability implications of the scheme. The government has asked the BoE to give its views on the scheme in September.

View Comments

Recommended For You