In seemingly positive news for buy-to-let landlords and mortgage holders, the governor of the Bank of England has moved to rule out an immediate rise in interest rates.
Mark Carney believes weaker than expected growth in the UK, coupled with ongoing uncertainty in the global economy. He believes that an, ‘unforgiving’ global environment means that more controlled monetary policy was not yet needed.
Backtrack
This assessment from Mr Carney comes just six months after he suggested that an increase in interest rates would come into, ‘sharper relief,’ at the start of 2016.
Many onlookers believed that rates would rise early in this year, bringing relief to savers who have been struggling with record low interest rates since the financial crash of 2007.
However, Carney’s comments suggest that rate rises are now a more remote prospect, with economists now suggesting there will be no change in interest rates until at least the second half of the year.
Carney suggests interest rate rise is not imminent
‘Last summer, I said that a decision as to when to start raising Bank rate would likely come into sharper relief around the turn of the year,’ Carney said in a speech at the Queen Mary University of London. He went on to say that, ‘well, the year has turned and, in my view, the decision proved straightforward-now is not the time to raise interest rates.’[1]
Gradual
Looking to the future, Carney said that any rises in the future would be small and gradual. He said that, ‘it is clear to me that since last summer, progress has been insufficient to warrant a tightening of monetary policy. The world is weaker and UK growth has slowed.’[1]
‘Due to the oil price collapse, inflation has fallen further and will likely remain low for longer. It has always been the case that, because the economy is subject to unforeseen disturbances, the precise path for Bank rate rises cannot be pre-ordained. We’ll do the right thing at the right time,’ he continued.[1]
[1] http://www.bbc.co.uk/news/business-35351217