The UK will see interest rate rises in the ‘relatively near term’, the Governor of the Bank of England has told the BBC.
Speaking on the BBC’s Radio 4 Today Programme, Mark Carney said that the UK would soon start to see a ‘gradual’ increase in interest rates, so long as the UK economy remains stable.
‘We can see that in the coming months if the economy continues on this track, it may be appropriate to raise interest rates,’ he said.
While he gave no straightforward indication of when exactly to expect a rate rise, he said it would be coming in the ‘relatively near term.’
Whenever that transpires it will be the first time the UK has raised interest rates in over a decade. The most recent change to the Bank of England’s rates was in August 2016, when the Bank’s monetary policy committee voted to cut rates to their lowest level ever (0.25 per cent), following the Brexit vote.
However, since then, the UK economy has somewhat continued to hold up, with unemployment reaching its lowest levels since the 1970s.
Also making a rate rise more likely is the UK economy, as a result of the pound’s devaluation, overshooting the Bank of England’s inflation target of 2 per cent. Most recent figures put the Consumer Prices Index (CPI) measure of inflation at 2.9 per cent.
Carney underlined, however, that any rate raise would be gradual due to the UK’s relatively low rate of growth. Official figures, from the Office for National Statistics, put growth figures for Q1 in 2017 at just 1. 5 per cent.
As Carney put it, ‘We're talking about just easing the foot off the accelerator to keep with the speed limit of the economy and so interest rate increases when they come - when and if they come - will be to a limited extent and gradual.’
But before savers get their hopes up it should be remembered that the Bank of England has previous form for hinting that a future rate rise is on the cards, only for it not to materialise. In 2013, for instance, Carney said he would consider raising rates when unemployment fell below 7 per cent. Despite unemployment falling, no rate rise came.
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