Home Forex Market News BoE's Carney Says Rate Hike May Be Getting Closer

BoE’s Carney Says Rate Hike May Be Getting Closer

Bank of England Governor Mark Carney said on Thursday that the U.K. economic outlook has improved and the central bank may be getting closer to raising interest rates.
Speaking at an actuaries’ conference in Wales, Carney said, “With many of the conditions for the economy to normalize now met, the point at which interest rates also begin to normalize is getting closer.”
“In recent months the judgement about precisely when to raise Bank Rate has become more balanced,” he added.
The BoE Monetary Policy Committee split for a second straight session this month on holding the key interest rate steady at a record low 0.50 percent. Two policymakers repeated their call for a quarter-point hike, citing the rapid absorption of slack with economic growth.
“While there is always uncertainty about the future, you can expect interest rates to begin to increase,” Carney said.
“We have no pre-set course, however; the timing will depend on the data.”
Further, Carney said the timing of the first rate hike was less important because he said when rates do begin to rise, they are likely to be gradual and limited.
Inflation was the lowest since 2009 during August, at 1.5 percent. The figure has held below the BoE’s target of 2 percent in every month thus far this year. The jobless rate fell to its lowest level since late 2008 during July.
The U.K. economy grew 0.8 percent in the second quarter, same as in the first quarter.
“Headwinds facing the economy are likely to take some time to die down,” Carney said. “Demand in our major export markets remains muted.”
Earlier today, BoE Deputy Governor Nemat Shafik said in an interview to Yorkshire Post that the euro are posed a ‘significant risk’ to the U.K. economy.
“Even when spare capacity is used up, Bank Rate will need to be materially lower than in the past in order to keep the economy operating at its potential and inflation at its target,” Carney said.
Acknowledging that a prolonged period of historically low interest rates could encourage other risks to develop, Carney said the biggest risks came from the housing market.
He also pointed out the possibility that financial markets may be mispricing risk and urged the insurers’ to watch for such risks.

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