In a speech at the Economic Policy Symposium in the US, Carney said that the UK economy’s direct exposure to China was ‘relatively modest’, meaning that problems hitting the world’s second largest economy were unlikely to change the process of rate increases.

“…It should be recognised that the direct exposure of the UK economy to China is relatively modest and that the recent tightening of financial conditions comes on the heels of a prolonged period of sustained improvement,” he said.

Developments in China were “unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert,” he added.

There has been speculation that an interest rate rise could be pushed back from Carney’s initial prediction that it would occur ‘around the turn of the year’, as the impact of China’s economy on downward commodity prices has been significant.

Carney noted that his prediction of when an interest rate rise would occur was not a prejudgement of a particular decision from the Bank of England’s Monetary Policy Committee.

“Indeed, as I said recently, the prospect of sustained momentum in the UK economy and the gradual firming of underling inflationary pressures will likely put the decision as to when to start the process of gradual monetary policy normalisation into sharper relief around the turn of this year. To be clear, that opinion doesn’t prejudge any particular decision,” he said.

“But it does indicate that recent events do not yet, to my mind, merit changing the MPC’s strategy for returning inflation to target – a strategy that already reflects the balance of two large gross effects: namely domestic strength on the one hand and disinflationary forces from the combination of the exchange rate and global weakness on the other.”

Carney said MPC members would continue to monitor global indicators in determining the precise timing and path for the Bank Base Rate rise.

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