INTEREST rates will rise more slowly than previously thought because of pressure from the global economy, Bank of England governor Mark Carney has said.
Mr Carney said he expected that "the next move in policy is going to be an increase" but said that since the summer factors weighing on inflation including the international slowdown had changed the likely path of rates.
The governor told the Commons Treasury Select Committee yesterday: "The combination of that means the cumulative tightening over the forecast period is likely to be less than previously thought."
He said the UK, which has seen interest rates at an historic low for more than five years and a £375 billion money-printing quantitative easing policy, was "still an economy that requires monetary stimulus".
His remarks come after the Bank's latest report on the UK economy predicted the changing economic picture meant inflation was likely to fall below 1 per cent in coming months. The governor had also said Europe was haunted by the "spectre" of stagnation.
The report cemented expectations that rates would remain on hold at 0.5 per cent until the second half of 2015. Mr Carney's comments indicate that even after this, the rate at which the cost of borrowing goes up will be slower than had been thought.
Lower oil and commodity prices as well as the strength of the pound in recent months, together with struggling wages, have kept inflation low.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article