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Carney says UK interest rates may rise in coming months

Staff Writer |
Mark Carney used a speech in Washington on Monday to warn that Brexit is likely to drive inflation higher, and again flag that the Bank of England could raise interest rates within months.

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The central bank governor made the comments as part of a lecture at the International Monetary Fund headquarters in Washington, DC, less than a week after the Bank's Monetary Policy Committee voted 7-2 to keep interest rates on hold.

But investors are now widely expecting an interest rate hike in November, following strong signals from the bank which were reiterated in Carney's speech on Monday.

"As the committee stated last week, if the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then, with the further lessening in the trade-off that this would imply, some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target," the central bank governor said.

However, Carney said that "any prospective increases" in the Bank's benchmark interest rate would be made at "a gradual pace and to a limited extent" and would need to continue providing "substantial support to the economy".

The governor also warned that Brexit could temporarily push up inflation, which is currently at 2.9% and far beyond the Bank's 2% target.


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