Bank of England's Carney says now not the time to raise rates

Cornelia Mascio
Giugno 20, 2017

The pound sterling fell by nearly a full cent against the dollar on Tuesday after Bank of England governor Mark Carney said now was not the time to raise interest rates, dashing some investors' hopes that the central bank had shifted in that direction.

The pound fell sharply after Mr Carney's comments.

Carney's speech, which was supposed to be delivered at a banquet at Mansion House on Thursday but was put off out of respect for the victims of the Grenfell Tower blaze, came shortly after three of the eight members of the hitherto decidedly dovish monetary policy committee voted to raise interest rates.

"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", Carney said.

The Chancellor, Philip Hammond, spoke alongside Carney, noting that Brexit negotiations should include a transitionary period in which the United Kingdom will be outside the customs union but will still abide by customs union rules.

Over the coming months, Carney wanted to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm and how the economy reacts to tighter financial conditions.

As Brexit negotiations unfold, the United Kingdom economy will be influenced by the expectations of domestic consumers, firms, and markets about any transition period and what will happen in the longer term, Mr Carney said.

"Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans", he said.

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