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13/06/2014
Interest Rates Could Rise This Year
The Governor of the Bank of England Mark Carney has said that interest rates may rise this year and warned that "gradual and limited" increases would be needed as the economy recovers.
Mr Carney made the comments during his first Mansion House speech on Thursday.
It is understood that the base rate has been stuck at 0.5% since 2009, but the strength of the recovery has increased speculation about when rates will rise, with Mr Carney saying that it "could happen sooner than markets currently expect."
Mr Carney also warned the Bank of England might take action within weeks to cool the threat of UK's overheating in the house market with prices rising at a rate around 10% each year.
Speaking before Mr Carney Chancellor George Osborne also confirmed plans to give the Bank's Financial Policy Committee new powers by the end of this Parliament, to prevent a situation like capping the size of the mortgage loans compared to income or the value of the house.
He said: "I want to make sure that the Bank of England has all the weapons it needs to guard against risks in the housing market. I want to protect those who own homes, protect those who aspire to own a home, and protect the millions who suffer when boom turns to bust."
Mr Carney added the economy is "unbalanced internally and externally", pointing to indications that despite better unemployment figures there remained too much "wasteful spare capacity".
The governor added that raising interest rates would be the wrong response currently, reiterating that this would be a "last line of defence".
(CVS)
Mr Carney made the comments during his first Mansion House speech on Thursday.
It is understood that the base rate has been stuck at 0.5% since 2009, but the strength of the recovery has increased speculation about when rates will rise, with Mr Carney saying that it "could happen sooner than markets currently expect."
Mr Carney also warned the Bank of England might take action within weeks to cool the threat of UK's overheating in the house market with prices rising at a rate around 10% each year.
Speaking before Mr Carney Chancellor George Osborne also confirmed plans to give the Bank's Financial Policy Committee new powers by the end of this Parliament, to prevent a situation like capping the size of the mortgage loans compared to income or the value of the house.
He said: "I want to make sure that the Bank of England has all the weapons it needs to guard against risks in the housing market. I want to protect those who own homes, protect those who aspire to own a home, and protect the millions who suffer when boom turns to bust."
Mr Carney added the economy is "unbalanced internally and externally", pointing to indications that despite better unemployment figures there remained too much "wasteful spare capacity".
The governor added that raising interest rates would be the wrong response currently, reiterating that this would be a "last line of defence".
(CVS)
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The interest rate will be held until the jobless figure drops below 7%, the Bank of England have announced. Making the announcement bank governor Mark Carney said he estimated some 750,000 jobs would need to be created to reduce the unemployment figure to such a level. Currently the UK unemployment rate stands at 7.8%.
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