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Carney kicks base rate increase into touch

Carney kicks base rate increase into touch

Bank of England governor Mark Carney has postponed an increase in interest rates, sending the pound’s value against the dollar tumbling.

Mr Carney, who had predicted several months ago that an increase in interest rates would come into “sharper relief“ at the beginning of this year, last week said the time was no longer right to raise the base rate.

Speaking in the Peston Lecture at Queen Mary University of London, he said the UK’s economy was being affected by a “powerful set of forces”.

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Mr Carney said: “Last summer, I said the decision as to when to start raising the bank (base) rate would likely come into sharper relief around the turn of this year.

“Well, the year has turned and, in my view, the decision proved straightforward: now is not yet the time to raise interest rates.

“This wasn’t a surprise to market participants or the wider public. They observed the renewed collapse in oil prices, the volatility in China, the moderation in growth and wages here at home since the summer, and rightly concluded that not enough cumulative progress had been made to warrant tightening monetary policy.”

The announcement led to the value of the pound against the dollar falling.

David Lamb, head of dealing at forex specialists Fexco, said: “The prospect of a UK interest rate rise hasn’t been kicked into the long grass. The governor hoofed it right out of the park.

“Mark Carney’s prediction – made last summer – that we would have greater clarity on interest rates at the start of 2016 has been completely overtaken by events.

“Six months on, the prospects for UK interest rates remain as clear as mud.”