Economia

Bank of England's Carney says now not the time to raise rates

Bank of England's Carney says now not the time to raise rates

The pound dropped to a one-week low and took out the $1.27 level on Tuesday after Bank of England Governor Mark Carney ruled out an imminent rate increase.

"From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin [an] adjustment [in monetary policy]", said Carney.

In the text of a speech that was due to be delivered last week at the annual Mansion House dinner, but was delayed as a mark of respect to the victims of the Grenfell Tower fire in West London, Carney also said that Britain's European Union exit negotiations would signal "the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption".

"Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans", he said. "Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption".

Over the coming months, Carney wanted to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm and how the economy reacts to tighter financial conditions.

Carney's comments come after three members of the Bank's Monetary Policy Committee last week voted to increase rates, shocking investors who had expected just one member, the outgoing Kristin Forbes, to back tightening policy.

Carney said in a global economy marked by a clear divide between surplus and deficit countries, the UK's current account was deeply in the red.