Bank of England's Carney says now not the time to raise rates

Posted June 20, 2017

In addition, he appears to be in "wait and see" mode indicating that he wants to see the extent to which other elements of demand offset weaker consumer spending over the coming months, and whether wages start to firm up.

Carney's warning speech at Mansion House sparked a downturn in sterling with the pound falling to a one-week low against the dollar at $1.2675, down from $1.275.

His comments come less than a week after the Monetary Policy Committee experienced a split on the issue at its monthly meeting, divided 5-3 over whether to raise rates in the closest vote since 2007.

Last week the MPC kept interest rates on hold at 0.25%, but Ian McCafferty, Michael Saunders and Kristin Forbes all voted for a rise to 0.5%, marking the first time three members have dissented for more than six years.

Sterling's weakness been a factor in consumer price inflation reaching its highest in almost four years, contributing to a slowdown in consumer spending and lacklustre first-quarter growth. "This includes pursuing a Brexit, and building an economy, that works for all".

The EU and the United Kingdom began formal Brexit negotiations on Monday.

Elsewhere in his remarks, Carney also reiterated that monetary policy measures by the Bank of England, "cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the European Union".

He added hopes that the uncertainty would soon lift to reveal "the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption".

It also fell over half a per cent to a five-day low of 88.02 pence per euro.

"The UK houses some of the world's largest CCPs (central counterparty clearing houses)". "Fragmentation of such global markets by jurisdiction or currency would reduce the benefits of central clearing", he said.

"Arguing to wait and see how the economy will react to the Brexit negotiations-which have only just begun and will last at least two years-suggests that Carney may be prepared to delay raising rates for a long time", said Allan Monks, an economist at J.P. Morgan.

A rate rise was not yet appropriate, Carney said.

But he said the latest MPC recruit, who has British, Argentinian and Italian citizenship, was likely to "shift the MPC's balance in a dovish direction".