BoE's Carney: As UK economy normalizes, rates will have to start to rise

By FXstreet.com | July 23, 2014 AAA

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

comments powered by Disqus
Related Forex Analysis
  1. USD/JPY Traders Await Clearer Guidance As A Doji Signals Hesitation
    Forex News

    USD/JPY Traders Await Clearer Guidance As A Doji Signals Hesitation

  2. USD/JPY is dancing around 107.00
    Forex News

    USD/JPY is dancing around 107.00

  3. USD/CAD Tests Critical Barrier As Intraday Dojis Denote Indecision
    Forex News

    USD/CAD Tests Critical Barrier As Intraday Dojis Denote Indecision

  4. NZD/USD Stalls At 0.8000 Barrier As A Doji Arises & Volume Fades
    Forex News

    NZD/USD Stalls At 0.8000 Barrier As A Doji Arises & Volume Fades

  5. EUR/USD sidelined above 1.2700
    Forex News

    EUR/USD sidelined above 1.2700

Trading Center