Bank Of England's Carney Says Stimulus Working

by
Reuters
Bank of England Governor Mark Carney said on Thursday that the British economy was gaining momentum and the Bank's stimulus was working.

Bank of England Governor Mark Carney said on Thursday that the British economy was gaining momentum and the Bank's stimulus was working.

He also said that British consumers and firms have taken on board the Bank's plan - or forward guidance - to keep interest rates low while unemployment remains high.

"The economy is picking up and the stimulus is working ... and while it's early days, we expect as well that we are consistent with the path to returning inflation to 2 percent," Carney told parliament's Treasury Committee.

He added that the central bank would consider providing more help for the economy if its recovery weakened.

As for its forward guidance, he said the plan was getting through to the people who needed to understand it.

"My experience in talking to businesses, our experience in terms of surveys of household expectations have been that the message has been understood," he said.

By contrast, some of the lawmakers on the committee said the nuanced "forward guidance" on the path of interest rates was not easy to understand for the general public.

Led by Carney, the central bank announced last month that it would not consider raising benchmark borrowing costs from their record-low 0.5 percent before Britain's jobless rate fell to 7 percent, with a number of caveats.

Investors have challenged the BoE's forecast that this would not happen before the third quarter of 2016, pricing in the first rate hike around late 2014 or early 2015.

Data on Wednesday put the unemployment rate at 7.7 percent.