UK on track for rate hike in near term, says BOE

The Gulf Today - Business - - Front Page -

LON­DON: Bank of Eng­land Gover­nor Mark Car­ney said on Fri­day that Bri­tain’s econ­omy was on track for the cen­tral bank to start rais­ing record-low in­ter­est rates in the “rel­a­tively near term.”

“What we have said, that if the econ­omy con­tin­ues on the track that it’s been on, and all in­di­ca­tions are that it is, in the rel­a­tively near term we can ex­pect that in­ter­est rates would in­crease some­what,” Car­ney told BBC ra­dio.

The Bri­tish cen­tral bank sur­prised mar­kets just over two weeks ago when it said most of its pol­i­cy­mak­ers thought the first rate hike in more than a decade would be needed “in the com­ing months,” if in­fla­tion pres­sure con­tin­ued to build.

Car­ney has pre­vi­ously said he was one of those pol­i­cy­mak­ers.

Most econ­o­mists now ex­pect the BOE to raise its Bank Rate to 0.50 per­cent from 0.25 per­cent on Nov. 2, at the end of its next pol­icy meet­ing.

Bri­tain’s econ­omy slowed sharply in early 2017 as the Brexit vote pushed up in­fla­tion, weigh­ing on spend­ing by con­sumers, and slowed in­vest­ment by com­pa­nies.

But the BOE thinks that Bri­tain’s de­par­ture from the Euro­pean Union is likely to mean the econ­omy will not be able grow as fast as be­fore with­out push­ing up in­fla­tion as the num­ber of mi­grant work­ers com­ing to the coun­try slows and com­pa­nies hold off on spend­ing to in­crease ca­pac­ity.

Car­ney said such con­straints rep­re­sented a lower Brexit “speed limit” for the econ­omy and meant the BOE had to think now about rais­ing rates.

“If the speed limit has slowed and we’re in a po­si­tion where we’ve used up a lot of the ca­pac­ity in this econ­omy ... it means that we should be think­ing about, and we are open about this, we’re think­ing about tak­ing our foot a bit off the ac­cel­er­a­tor,” he told the BBC ra­dio.

Asked whether that meant a rate hike in Novem­ber, Car­ney said: “I think the in­di­ca­tion that the MPC has given is about as clear an in­di­ca­tion as one can ex­pect.”

“In­ter­est rate in­creases when and if they come will be to a lim­ited ex­tent and grad­ual,” Car­ney said, echo­ing many pre­vi­ous state­ments from the Bank.

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