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Bank of England: It is not time to raise interest rates

Staff writer |
Now is not yet the time to raise interest rates, the Governor of the Bank of England, Mark Carney, said.

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Carney listed six reasons why the events the UK is facing were different to those the US Federal Reserve was up against. Carney was speaking at Queen Mary University, London.

First, in the Governor's opinion cost pressures in the U.S. were stronger than in the UK, rising well above their historical averages.

Then, the UK economy was twice as open as America's, leaving it more exposed to economic weakness in the rest of the world and so-called pass-through effects from a stronger currency.

Finally, the UK was undergoing the largest reduction in government spending within the OECD space, not to mention that the BoE's ability to employ macroprudential measures meant it had less need to use monetary policy.

To boot, after having risen short-term interest rates in the US were only at the same level as in Britain.

The Bank's two-year time horizon to return inflation to its 2% target was a reflection of the need to balance strong private domestic demand versus sustained headwinds from overseas and ongoing fiscal consolidation, Carney said.

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