View more on these topics

Carney says rates could rise to 3% by 2017

Bank of England governor Mark Carney has said interest rates could reach 3 per cent in the next three years as he launched a robust defence of his forward guidance policy.

Last August, Carney said interest rates would not rise until unemployment fell below 7 per cent. After unemployment fell rapidly, he adjusted the threshold in February to a range of 18
economic indicators.

At a Treasury select committee hearing this week, MPs argued that forward guidance was “dead and buried”.

Carney told MPs the change had only been made to boost transparency of forecasting and was not related to the drop in unemployment. He said the new measures were entirely down to greater transparency and more accurate economic forecasting.

Conservative MP Brooks Newmark said the changes showed that the forward guidance policy had been traded in for “fuzzy guidance”.

Carney said: “We provided guidance that was well understood. Businesses indicated it gave them greater confidence in the recovery and influenced hiring and spending decisions, contributing to falling unemployment.”

Carney said the path of interest rates was clear and said they could hit 3 per cent within three years.

He said: “Interest rates will rise on a gradual and limited extent. Some Monetary Policy Committee members have put more precise figures on when interest rates will rise over the three-year horizon. Charlie Bean said [an increase of] 2 per cent to 2.5 per cent and I don’t think that is an unreasonable sense to get across.”

Mortgage Centre IFA Fahim Antoniades says: “Given that rates have been low for so long, 3 per cent in three years seems like a quick increase. 

“After the next two quarters we will know more about the rate of recovery and the speed of potential rate rises.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com