Bank of England in No Rush to Increase Interest Rates

In an interview, the central bank governor in London Mark Carney has stated that the Bank of England will only start to increase the interest rates when a range of measures start suggesting that the economy is operating at closer to full capacity.

The bank is in no rush to raise the rates. They said they would be looking at a broader range of measures of slack in the economy than just the unemployment rate when looking to consider whether to raise the borrowing costs. Carney reportedly told BBC that “the path of monetary policy, the path of interest rates is going to be calibrated very carefully to ensure that only when we see sustainable growth in jobs, in incomes and in spending, will we make adjustments,” adding that they “can responsibly take (their) time and only adjust interest rates once more slack has been cut.”

The Bank stated that in the run up to the publication of the economic forecasts, the markets had been pricing in a first rise in interest rates in the second quarter of 2015, and that this was consistent with inflation just below the BoE’s 2 percent goal.

Carney is also concerned about Britain’s history of the up’s and down’s in the house prices, and that the government’s plan to help home buyers to help buy was not a means of being a major factor to boost the prices for the time being. He said that “it’s still pretty small, it’s all outside of London, it’s for lower priced houses, as a whole it’s mainly with first time buyers, so it’s not driving the housing market.” However they have a responsibility to keep an eye on it.

According to Carney, the Bank will be stating publicly and on its own timetable if it becomes unhappy regarding the financial stability implications of the scheme. The government has asked that the Bank give its views on the scheme in September this year.

Denisha Sahadevan

Courtesy : Reuter News Agency