The Bank of England has been accused by MPs of behaving like an unreliable boyfriend, giving mixed messages on when the first rise in interest rates is likely.
The Bank’s governor, Mark Carney, appeared to play down the need for an early rate rise when questioned by the House of Commons Treasury select committee on Tuesday, despite earlier leading markets to believe a hike was possible before the end of 2014.
Pat McFadden, Labour MP and a member of the TSC, compared the Bank and its stance on rates to an “unreliable boyfriend – one day hot, one day cold”.
Andrew Tyrie, the committee’s chairman, said that since Carney arrived at the Bank almost a year ago, they have had “quite a lot of guidance, not all of it pointing in the same direction”.
Under pressure to explain the apparent confusion surrounding the Bank’s stance on rates, Carney insisted the monetary policy committee (MPC) had been consistent in approach, and said the data would dictate the timing of the first rate rise.
However, he suggested there was still a significant amount of slack in the economy to be used up before a rate rise would be necessary, and pointed to weaker-than-expected wage growth as an argument against a hike.
“The best collective judgement of the MPC, which I share, is that there is additional spare capacity in the labour market that can be absorbed further before we would look to begin to normalise interest rates. The exact timing of that will be driven by the data.”
He said several times that when the time does come to start raising rates, increases will be “limited and gradual”.
via The Guardian
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