Governor hints at possible interest rate rise
In a keynote speech yesterday, the Governor of the Bank of England Mark Carney, said an interest rate rise “could happen sooner than markets currently expect”.
The consensus among economists was that rates would rise in the first half of next year, or even earlier.
Mr Carney acknowledged there was “already great speculation about the exact timing of the first rate hike” from their record low of 0.5%, adding that the decision was “becoming more balanced”.
He went on to emphasise that there was “no pre-set course” on when to raise rates. There was more spare capacity in the economy that would need to be used up first, he said.
And he also reiterated that the timing of the first rise was less important than the speed at which subsequent increases were made.
“We expect that eventual increases in Bank rate will be gradual and limited,” he said.
Speaking at the same event George Osborne confirmed plans to give the Bank new powers to prevent the housing market from overheating.
These will include capping the size of mortgage loans compared to income or the value of the house.
The new powers would be given to the Bank’s Financial Policy Committee by the end of this Parliament, the Chancellor said. “We saw from the last crisis the dangerous temptations for politicians to leave the punch bowl where it is and keep the party going on for too long.
“I want to make sure that the Bank of England has all the weapons it needs to guard against risks in the housing market.
“I want to protect those who own homes, protect those who aspire to own a home, and protect the millions who suffer when boom turns to bust.”