The time is not right to begin raising interest rates, Bank of England Governor Mark Carney said on Tuesday, citing the weak wage growth and inflationary pressures.
“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 in his delayed speech at the Mansion House.
The dovish comment from Carney sent the pound lower.
In the months ahead, the BoE chief said he would like to see the extent to which weaker consumption growth is offset by other components of demand and whether wages begin to firm.
More generally, he intends to assess how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.
Carney’s views were in contrast to the hawkish stance adopted by a few policymakers at the June monetary policy meeting.
Kristin Forbes, Ian McCafferty and Michael Saunders sought a quarter point rate hike at the June meeting. They said partial withdrawal of stimulus will help to moderate inflation overshoot.
Regarding the UK’s current account deficit, Carney today said its sustainability remains an open question.
Further, he observed that protectionist sentiments are once again rising across the advanced world.
“Excessive trade and current account imbalances are now politically as well as economically unsustainable,” Carney said.
In his speech at the Mansion House, Chancellor Philip Hammond stressed that the UK should pursue a free trade agreement that covers both goods and services.
The European Union and the UK began formal Brexit negotiations on Monday.
The speeches were originally scheduled for last Thursday, but were postponed following the tragic fire at Grenfell Tower that claimed many lives.
by RTT Staff Writer
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