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Mark Carney drops interest rate rise hint as “many of the conditions for the economy to normalise [are] now met”
Interest rates will be rising soon.
In a speech this afternoon mainly focused on the insurance industry, Mark Carney reiterated the Bank of England's stance on interest rates, and indicated that they will be rising before long. The Bank governor would not give a precise time scale, but saw the pieces falling in to place:
While there is always uncertainty about the future, you can expect interest rates to begin to increase.
The precise timing of the first rate rise is less important than our expectation that, when rates do begin to rise, those increases are likely to be gradual and limited.
The rise, he said, would not be set to a schedule but would "depend on the data" – but that the jigsaw was beginning to take shape.
With many of the conditions for the economy to normalise now met, the point at which interest rates also begin to normalise is getting closer. In recent months the judgement about precisely when to raise Bank Rate has become more balanced.
The conditions that Carney will consider will be inflation, the state of the jobs market and the housing market. Inflation is under the Bank's mandated target of two per cent, while unemployment is dropping.
Carney has previously said that he expects wages, which are stubbornly stuck behind inflation, to catch up next summer. A rate rise will likely come first, possibly in the spring.
House prices may be cooling, although a definite trend is yet to emerge. ONS figures from July point to a 11.7 per cent rise since the same month last year.