Bank of England Governor Mark Carney: 'Now not the time to raise interest rate'

  • Video report by ITV News Correspondent Emily Morgan

Interest rates should not be raised anytime soon while wages in the UK continue to stagnate and the fallout from Brexit remains unclear, according to Mark Carney.

The Bank of England Governor indicated his reluctance to hike rates after three Bank policymakers argued in favour of a rise amid warnings Brexit-fulled inflation will surge over the summer.

Speaking at Mansion House in central London, Mr Carney said that now was "not yet the time to begin that adjustment".

His comments followed those by Chancellor Philip Hammond, who made the event's keynote speech - delayed by almost a week following the Grenfell Tower fire.

On Tuesday, Mr Hammond outlined his vision for a softer Brexit to ensure a "deep and special" relationship with the EU.

Delivering his delayed speech, Mr Carney said: "Different members of the Monetary Policy Committee will understandably have different views about the outlook and therefore on the potential timing of any Bank 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 that adjustment."

The Canadian said he would like to see if falling consumer confidence is offset by other components of demand, whether wages begin to "firm", how the economy reacts to "tighter financial conditions", as well as the reality of Brexit negotiations, before considering any rate hike.

"Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU," he said.

"But it can influence how this hit to incomes is distributed between job losses and price rises. And it can support households and businesses as they adjust to such profound change.

"Indeed, in such exceptional circumstances, the MPC is required to balance any trade-off between the speed with which it returns inflation sustainably to the target and the support that monetary policy provides to jobs and activity."

Last week, interest rates were kept at 0.25% by the MPC, despite three policymakers voting for a 0.5% rise.

Inflation hit 2.9% in May - its highest level in nearly four years.

Philip Hammond pressed for a softer version of Brexit. Credit: PA

Speaking beforehand, Mr Hammond argued for the arrangement of a smooth Brexit deal with "mutually beneficial" transitional arrangements with the EU to ensure Britain avoids heading towards a "cliff edge".

The Chancellor pressed argued in favour of a "frictionless" future customs arrangement with European partners and a "comprehensive" trade arrangement guaranteeing a "deep and special" partnership with the bloc.

He told business leaders that future migration to the UK would be managed but not "shut down", maintaining that the country was not about to "turn inward".

And he stressed that negotiators would press for a Brexit for "British jobs, British business and British prosperity."

Official Brexit negotiations began on Monday. Credit: PA

In his keynote speech, Mr Hammond again signalled his "soft Brexit" credentials by stressing Britain would leave the EU "in a way that prioritises British jobs and underpins Britain's prosperity".

He told the audience: "I have said before and I remain clear today, that when the British people voted last June they did not vote to become poorer or less secure.

"They did vote to leave the EU, and we will leave the EU, but it must be done in a way that works for Britain, in a way that prioritises British jobs and underpins prosperity."

This, Mr Hammond said, involved securing a "comprehensive agreement for trade in goods and services".

It also required the establishing of "mutually beneficial transitional arrangements" in order to avoid "unnecessary disruption and dangerous cliff edges".

And arrangements to facilitate trade and maintain the land border between Ireland and Northern Ireland would also be vital, he said.

Mr Hammond said Britain needed a 'deep' relationship with the EU. Credit: PA

And Mr Hammond urged that while Britain would look to manage immigration, it would not be "shut down" by the country's departure from the EU.

We are not about to turn inward. But we do want to ensure that the arrangements we have in place work for our economy," he said.

"Just as the British people understand the benefits of trade, so too they understand how important it is to business to be able to access global talent and to move individuals around their organisations.

"So while we seek to manage migration, we do not seek to shut it down

Migration to Britain will be managed but not 'shut down'. Credit: PA

Mr Hammond spoke just 24 hours after Brexit negotiations officially began between Britain and the EU.

He said that while initial discussions between the two sides had been "positive", a lot tougher negotiations were expected to come.

"Our departure from the EU is underway, but ensuring that it happens via a smooth pathway to a deep and special future partnership with our EU neighbours.

"One that protects jobs, prosperity and living standards in Britain will require every ounce of skill and diplomacy we can muster.

"Yesterday was a positive start, but it will get tougher

"But we are ready for the challenge and confident we can deliver for British jobs, British business and British prosperity."