Bank of England governor Mark Carney has raised expectations of an interest rate rise next month, after talking up the UK’s economic performance.
Data points to a pick-up in growth in the second quarter of the year, after a disappointing start to 2018, according to the chief monetary policymaker.
In a speech, Carney said: “The incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate. A number of indicators of household spending and sentiment have bounced back strongly from what increasingly appears to have been erratic weakness in Q1.”
The job market has remained strong and headline inflation is expected to rise in the short term because of higher energy prices, the governor said. He added that the economy is evolving largely in line with the May inflation report projections.
In this scenario, raising interest rates would be appropriate to return inflation to its target, according to Carney.
The Bank of England’s rate-setting Monetary Policy Committee is due to meet again in August.
At the last meeting in June, three members of the committee voted to immediately raise rates to 0.75%, from the current level of 0.5%. Carney voted to hold rates in June, but following his remarks today, it appears he could switch and favour a rate rise next month.
[Source: Mortgage Solutions, 5 July 2018]
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