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Bank governor drops further hints of interest rate rise

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Written by: Lana Clements
22/02/2018
Bank of England governor Mark Carney has given further hints that interest rates are set to rise again in the coming months.

Appearing before MPs, the central bank chief said markets, which are pricing in a May rate hike, are understanding the policymakers’ message.

In a written report to the Treasury Select Committee, Carney reiterated a previous warning that interest rates are to rise faster than previously expected.

He said: “Were the economy to evolve broadly in line with the February inflation report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report.”

The Bank’s chief economist Andy Haldane further stressed the likelihood of rate rises.

He said economy growth is likely to beat policymakers’ forecasts – although GDP growth has today been unexpectedly revised down for the final quarter of 2017 to 0.4%.

Haldane also said wages are expected to rise above 3%, after growth was measured at 2.5% in the final three months of last year.

He added that policymakers would now pay close attention to pay data in the coming months.

However, Carney warned that Britain’s exit from the European Union still has the potential to throw the economy off course.

In the pre-hearing report, he wrote: “The biggest influence on, and source of uncertainty about the economic outlook, remains Brexit.”

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