LONDON (Reuters) - An increase in Britain’s rock-bottom interest rates is not guaranteed although households should prepare for higher borrowing costs, Bank of England Governor Mark Carney said in comments published on Saturday.
“If we think there is a prospect, a possibility – that’s a possibility not a certainty – of rate rises, then that is far, far better to let the British people know so they can prepare,” he said in an interview with the Mail on Sunday newspaper.
“If events mean that does not happen and rate rises are not appropriate, then we will do the right thing and we will not adjust rates,” Carney was quoted as saying.
The Bank cut interest rates to a record low of 0.5 percent in 2009 and has kept them there ever since, even as Britain’s economy recovered strongly over the past two years.
Carney has previously said that a decision about when to raise rates would become clearer around the turn of the year.
Only one of the bank’s nine policymakers has voted for a hike and investors are not expecting a first BoE move until late 2016 or early 2017 due to China’s economic slowdown, Britain’s near-zero inflation rate and the U.S. Federal Reserve’s cautious approach about raising rates.
Carney said in the interview that the Bank expected that when rates do go up, the path would be “gentle,” echoing his previous guidance on what is likely to happen to borrowing costs as Britain recovers from the financial crisis.
He also said the bank was “focused not on loosening monetary policy, but on raising interest rates and deciding the right time and place to do that.”
Carney defended recent speeches he has made on risks to the financial sector from climate change and on the benefits and risks to Britain’s economy from its membership in the European Union, a sensitive political issue before a referendum on Britain’s EU membership which is due before the end of 2017.
“Speaking as a central bank, it is very likely that Europe has advantaged the dynamism of this economy. In fact, it is without question,” he said, reiterating comments he made earlier this week.
“We have to say something,” Carney said, adding that he was due to address MPs on Britain’s EU membership. “The British people would expect me to have something to say.”
Reporting By Costas Pitas and William Schomberg; Editing by Cynthia Osterman