Interest rates to stay put, Carney hints
INTEREST rates may not rise in the coming years, the Governor of the Bank of England has said, in a blow to savers.
Mark Carney said that he would “do the right thing” and not raise interest rates if “events” mean that an adjustment is “not appropriate”.
The Governor has previously said that the decision to raise rates “will likely come into sharper relief around the turn of this year”.
His remarks will be welcomed by home owners but may alarm savers who have seen the value of their nesteggs stagnate under low interest rates.
Mr Carney did urge UK households to prepare now for an increase in interest rates. He said: “If we think there is a prospect, a possibility – that’s a possibility not a certainty – of rate rises, then that is far, far better to let the British people know so they can prepare.”
However, he made it clear that interest rates could remain low for longer.
“If events mean that does not happen and rate rises are not appropriate, then we will do the right thing and we will not adjust rates,” he said.
Low inflation, an expectation that the US Federal Reserve will not raise rates until next year and China’s economic slowdown mean markets do not expect the Bank of England to lift rates from a record low of 0.5pc until April 2017.
Rates are only expected to rise to 1.5 per cent by the end of the decade.
Mr Carney said any increases would be “modest” and “gentle”, reinforcing the Bank’s expectation that rises will be gradual. The Governor also said hundreds of thousands of mortgage holders were vulnerable to increases in interest rates.
After making a speech last week Mr Carney faced criticism for his intervention in the debate about the in-out referendum on Britain’s membership of the European Union.
He said that Britain’s membership of the European Union was beneficial to the economy but reforms were needed to protect the UK from financial “shocks”.
He added that being a part of the EU had increased the “openness and dynamism” of the UK economy, although he made it clear that Britain needed to change its relationship with Brussels to ensure that it was protected from the closer integration of the eurozone. His comments were seen as a major boost to David Cameron, who has pledged to hold an in-out referendum on Britain’s membership of the EU by the end of 2017.
However, Mr Carney was criticised by Lord Lawson, the former Tory chancellor, who is leading the Eurosceptic Conservatives for Britain group.
Mr Carney told the Mail on Sunday: “Speaking as a central bank, it is very likely that Europe has advantaged the dynamism of this economy. In fact, it is without question.
“The British people would expect me to have something to say.”