Bank of England governor Mark Carney: An interest rate rise is coming

Bank of England governor Mark Carney has reiterated his expectation that the bank will raise interest rates soon.

In an interview with the BBC’s Today programme, Carney used typically vague language, saying if the economy continues along its current trajectory, the rate-setting monetary policy committee may raise rates for the first time in over a decade.

We can see that in the coming months if the economy continues on this track it may be appropriate to raise interest rates.

Carney also insisted the UK does not have a household debt bubble, despite the Bank of England’s financial policy committee saying earlier this week that banks must hold an additional £10bn to cover potential losses from rising debt.

“Since the crisis British households have paid down a tremendous amount of debt,” he said.

“The level of debt burden relative to income in this economy has gone down by 20 percentage points… In the past year the overall level of debt has just begun to grow in line with GDP.”

Read more: Impact of Brexit will be dependent on trade deals says Mark Carney

Brexit shock threat

His comments came after a landmark speech during a two-day conference celebrating the 20th anniversary of the Bank’s independence.

Speaking to an audience which included Prime Minister Theresa May, Carney said the risk of a “shock” from Brexit justifies a slow rate of return to target inflation.

“In exceptional circumstances like today when the economy is facing profound structural change, the MPC can extend the horizon over which it returns inflation to target from above in order to balance the effects on jobs and activity,” he said.

“Monetary policy will be set to achieve the inflation target in a way that helps smooth real adjustment in the economy and supports jobs in the wake of very large external forces.

“Banks will be capitalised so that they can withstand any severe shock that could be associated with Brexit – however unlikely – and still meet demand for credit.”

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