BoE Carney Says 2.5% New Normal For UK Rates

Bank of England governor Mark Carney has suggested the “new normal” for interest rates is likely to be about 2.5% when rates start to increase.

Speaking to BBC Radio 4’s Today programme he also suggested the rates could reach this level in early 2017.

Mr Carney suggested a return to “normal” interest rates of 5% was unlikely in the medium term.

He said things had changed to the point that it was almost impossible to raise rates to their pre-recession level.

He also added that rate rises would be more gradual and limited than in the past.

The Bank governor said the timing of an interest rate rise was less important than the average level at which they would settle in the future.

“The big picture,” he said “Is not whether the Bank Rate goes from 0.5% to slightly above that lowest ever level.

“That’s not the big picture, the big picture is where interest rates go in the medium term, because if I am taking out a mortgage and if I am thinking of investing in a new plant, if I’m thinking about taking on new people. That’s what I’m thinking about.”

Mr Carney added: “The guidance we are giving is… the time will come to raise interest rates… but when we raise interest rates we expect to do so in a gradual and limited fashion,”

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza