Bank of England in no rush to increase rates, says Carney
THE Bank of England will only start to increase interest rates when a range of measures suggest the economy is operating at closer to full capacity, central bank governor Mark Carney said yesterday.
Last week, the bank said it would look at a broader range of measures of slack in the economy than just the unemployment rate when considering whether to raise borrowing costs, and that it was in no rush to raise rates.
"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," Mr Carney told the BBC.
"We can responsibly take our time and only adjust rates once more slack has been cut."
The bank said that in the run-up to the publication of its economic forecasts, 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 2pc goal.
The bank governor also said he was concerned about Britain's history of booms and busts in house prices, but that a government scheme to aid home-buyers, Help to Buy, was not a major factor in boosting prices for now.
"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, but we have a responsibility to watch it," he said.
Mr Carney said the bank would state publicly, and on its own timetable, if it became unhappy about the financial stability implications of the scheme. The government has asked the bank to give its views on the scheme in September.
Mortgage lender Nationwide said last month that British house prices were up 9pc on the year, the biggest annual increase in three years.