Carney kills rate rise talk even as US prepares hike
The Bank of England gave no sign that it was preparing for a rate rise soon, saying yesterday that Britain's near-zero inflation would pick up only slowly even if borrowing costs stay on hold throughout next year.
Governor Mark Carney, who had previously said a decision on whether to raise rates would come into sharper focus around the end of this year, was vaguer this time, saying simply that the BoE would move when the time was right.
Sterling fell sharply after the BoE's announcement, which surprised investors who had expected a clearer signal that a rate hike was approaching and contrasted it with the tone of the US Federal Reserve. Its chair, Janet Yellen, said on Wednesday that a US rate rise was a prospect for December.
Only one BoE policymaker, Ian McCafferty, voted to raise interest rates this month, as most economists had expected. The other Monetary Policy Committee members opted to keep them at a record-low 0.5pc, where they have been since March 2009.
Mr Carney, asked by a reporter if he regretted saying a rate decision would become clearer around the turn of the year, said: "Absolutely not."
He said the prospect of a rate increase was still growing and surveys showed about two-thirds of households expect that rates will start to go up at some point over the next 12 months.
"Given forecasts, that is a reasonable expectation," he said, before stressing there remained a risk of a deeper global economic slowdown hitting Britain's economy.
"We'll take our decisions at the right time," he said.
Britain grew faster than any other big developed nation last year and is still on course to be around the top of the pack in 2015, even as the BoE trimmed its near-term growth forecasts.
At the same time, inflation remains stuck below zero, pushed down by a plunge prices of energy and other imported goods which the BoE said was now likely to keep inflation below 1pc until the middle of next year. (Reuters)