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Carney sets out how and when rates will rise


Interest rates could rise as early as the turn of the year, Bank of England governor Mark Carney has hinted.

In a speech yesterday, Carney said rates will increase slowly and gradually from their current level of 0.5 per cent to around 2.25 per cent.

He said the ‘equilibrium’ rate of interest – the rate needed to keep the economy at its potential and inflation on target – will be lower than the historical average interest rate of 4.5 per cent.

Carney said: “It would not seem unreasonable to me to expect that once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historical averages.

“In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.”

He said the increase in rates will not be “linear or pre-determined”.

Carney said the Monetary policy committee will consider three major factors when deciding when and how to raise rates: the pace of economic activity, household debt and core inflation.

He said: “Shocks to the economy could easily adjust the timing and magnitude of interest rate increases.

“Given these considerations, the MPC will have to feel its way as it goes, monitoring a wide range of indicators and adjusting the pace and degree of Bank rate as it learns about the effects of higher interest rates on the economy.”



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There is one comment at the moment, we would love to hear your opinion too.

  1. How many times is that interest rate rises have been announced? Every three years I’m offered a tracker or a fixed rate on a mortgage I have. I’ll be opting for the tracker.

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