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Bank of England: Sooner-than-anticipated turnaround?

June 16, 2014

Bank of England Governor Mark Carney signaled the central bank may raise its key interest rate from a record low earlier than investors so far expect. Contrary to the European Central Bank, which has just announced additional stimulus measures to support the economic recovery in the Eurozone, the Bank of England could shift its monetary bias earlier than anticipated on the back of the U.K.’s economic recovery and worrying price developments in the housing market.

Reports this week added to evidence of a robust economy, showing U.K. unemployment declined more than expected and industrial production rose at the fastest annual pace since 2011. However, Carney said there are still risks to the recovery, including the strength of the pound, and any policy tightening will be “gradual and limited,” adding that “there is already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect.” The BoE’s key interest rate has been at a record low of 0.5% since March 2009.

 

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