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Interest rates to 'stay low', says Bank of England's Mark Carney Interest rates to 'stay low', says Bank of England's Mark Carney
(35 minutes later)
Bank of England governor Mark Carney has played down speculation of an imminent rate hike, signalling that, although the economy is returning to normal, the cost of borrowing will remain at a record low for "for some time". Bank of England governor Mark Carney has played down speculation of an imminent rate hike, signalling that, although the economy is returning to normal, the cost of borrowing will remain at a record low "for some time".
Drawing a comparison to England's performance in the World Cup, Mr Carney said the competition is just getting started and the "prize" of a sustained and balanced economic recovery is yet to be achieved.Drawing a comparison to England's performance in the World Cup, Mr Carney said the competition is just getting started and the "prize" of a sustained and balanced economic recovery is yet to be achieved.
"Securing the recovery is like making it through the qualifying rounds of the World Cup. That is an achievement, not the ultimate goal," he said. "The real tournament is just beginning and its prize is a strong, sustained and balanced growth." "Securing the recovery is like making it through the qualifying rounds of the World Cup. That is an achievement, not the ultimate goal," he said. "The real tournament is just beginning and its prize is strong, sustained and balanced growth."
The Bank of England has said that the timing of the first rate rise will depend on its estimate of the level of spare capacity in the jobs market, gauged from various measures- such as unemployment and hours worked.The Bank of England has said that the timing of the first rate rise will depend on its estimate of the level of spare capacity in the jobs market, gauged from various measures- such as unemployment and hours worked.
Today, Mr Carney signalled that "there is additional slack, wasteful spare capacity that can be used up" in the labour market, with 1.4 million people working part-time because they cannot find full-time jobs.Today, Mr Carney signalled that "there is additional slack, wasteful spare capacity that can be used up" in the labour market, with 1.4 million people working part-time because they cannot find full-time jobs.
Economists said his remarks struck a "dovish" tone, dampening market speculation that rates, currently at a record of 0.5 per cent, will rise in the second quarter of 2015 -coinciding with the next general election. Economists said his remarks struck a "dovish" tone, dampening market speculation that rates, currently at a record low of 0.5 per cent, will rise in the second quarter of 2015 -coinciding with the next general election.
"Despite the strength of the recovery and, in particular, the robustness of the labour market, the MPC stuck to its previous estimate that ‘slack’ in the economy amounts to 1- 1.5 per cent of GDP," said Martin Beck, senior economic adviser to the EY ITEM Club, adding that he does not expect to see a rise in rates until "well into 2015". "Despite the strength of the recovery and, in particular, the robustness of the labour market, the MPC stuck to its previous estimate that slack in the economy amounts to 1- 1.5 per cent of GDP," said Martin Beck, senior economic adviser to the EY ITEM Club, adding that he does not expect to see a rise until "well into 2015".
In its quarterly inflation report, the Bank lifted its growth forecasts for next year and predicted unemployment would fall faster than expected, coinciding with today's unemployment figures which showed the number of people in work rose to an all-time high of 30.4 million in the three months to March. In its quarterly inflation report, the Bank lifted its growth forecasts for next year and predicted unemployment would fall faster than it thought in February, falling to 5.9 per cent in the second quarter of 2017.
The Bank expects the economy to grow 3.4 per cent this year, unchanged from its February report, and 2.9 per cent next year, up from its previous estimate of 2.7 per cent. Mr Carney's comments coincided with today's upbeat unemployment figures which showed the number of people in work rose to an all-time high of 30.4 million in the three months to March.
The Bank expects the economy to grow 3.4 per cent this year, unchanged from its February report, and 2.9 per cent next year, up from its previous estimate of 2.7 per cent for 2015. It trimmed its growth forecast to 2.8 per cent from 2.9 per cent for 2006.