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It’s not time to raise interest rates, says Bank of England governor

Joanna Faith
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Joanna Faith

Bank of England governor Mark Carney has said “now is not yet the time” to raise interest rates.

In his Mansion House speech, Carney pointed to stagnate wage growth and uncertainty surrounding Brexit negotiations.

He 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 [a base rate increase].

“In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.”

Carney also alluded to the fact that last week, policymakers narrowly voted 5-3 in favour of keeping the base rate at 0.25%.

“Different members of the MPC [Monetary Policy Committee] will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase. But all expect that any changes would be limited in scope and gradual in pace,” he said.

The vote came after inflation rose to a fresh four-year high of 2.9% in May, the fourth consecutive month it has exceeded the Bank of England’s 2% target.