Mark Carney has reignited the interest rate debate with comments in a speech delivered at the ECB central banking forum in Portugal.
The governor appeared to indicate a possible change of tack when it comes to interest rates, hinting at a possible near-term rise.
He said that as monetary policy affects companies’ profits and cash flows it is important that central banks support businesses, before intimating a normalisation of monetary policy may be on the horizon.
Mr Carney said: “Some removal of monetary stimulus is likely to become necessary if the trade-off facing the Monetary Policy Committee continues to lessen and the policy decision accordingly becomes more conventional.”
The governor left the door ajar by suggesting that the Bank would be considering various pertinent issues over the coming months.
These, Mr Carney said, would include the extent to which consumption growth is offset by factors such as business investment, whether “wages and labour costs begin to firm”, and “how the economy reacts to both tighter financial conditions and the reality of Brexit”.
The Bank of England cut the Base rate to 0.25 per cent in August 2016. It had previously been held at 0.50 per cent since 2009.
However, ongoing pressure from business leader, desperate for a rise in rates to release pressure on them and the economy, especially with inflation reaching 2.9 per cent, are cause for a possible revision of the Bank's policy.
