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Mark Carney, the Governor of the Bank of England, said in a speech titled A Fine Balance that he did not think now was the time to increase interest rates.
This is after the last Monetary Policy Committee (MPC) voted 5 – 3 to hold the Bank Base Rate at 0.25%. This was the narrowest margin for some time to hold the rate and shows that the Hawks within the MPC are getting nervous.
Carney said, “from my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment.”
He also added that if the outlook changed for the economy and sustained inflation that any increases in the Base Rate would be small and gradual.
Talking of the Transition period between now and a finalised Brexit deal, Carney said:
“Since the prospect of Brexit emerged, financial markets, notably sterling, have marked down the UK’s economic prospects.
“Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU, but it can influence how this hit to incomes is distributed between job losses and price rises. And it can support households and businesses as they adjust to such profound change. Indeed, in such exceptional circumstances, the MPC is required to balance any trade off between the speed with which it returns inflation sustainably to the target and the support that monetary policy provides to jobs and activity.”
To read the full speech Click Here
From Mark Carney’s caution for the economic outlook before any Brexit deal is done it looks like he at least is keen to keep rates the same until anything more concrete is agreed.
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