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