FXStreet (Łódź) - In his speech at the Commonwealth Games Business Conference in Glasgow, BoE head Mark Carney said that the UK economy was normalizing but that the central bank didn't have any "preset course" toward higher interest rates, as the timing of the first hike would be determined by the data.
The governor added that once rates started rising, the process would be "gradual and limited," but that wouldn't happen until real wages began growing consistently.
“The economy is finally producing as much as it did on the eve of the crisis in 2008, and inflation is back near its 2% target," Carney pointed out. “A key judgment for the Monetary Policy Committee is when and to what extent these developments will translate into real wage growth, and in turn that wage growth into price pressures.”
He emphasized that spare capacity being used up faster than expected.
Carney also remarked that the strength of the pound over the past year was one of the headwinds facing the economy. He added that rising housing prices could result in an increase of mortgage debt taken on by households and that "if a lot of people are highly indebted, that could tip the economy into recession.”
Moreover, Carney Carney suggested that the UK should diversify trade away from slow-growing developed markets such as Europe to the Commonwealth and emerging markets.
During Carney's speech the pound fell from 1.7050 to 1.7030 and then sat in the middle at 1.7040