Bank of England governor Mark Carney said the UK is “moving closer” to a rise in interest rates after more than six years at historical lows.
Mr Carney told MPs on the Treasury Select Committee that Britain is edging towards being able to raise rates – currently at 0.5% – based on the strength of the recovering UK economy, which was the fastest growing of the G7 nations last year.
Mr Carney said: “The point at which interest rates rise is moving closer.”
The governor’s comments follow official data showing the Consumer Price Index (CPI) measure of inflation slipped back from 0.1% in May to zero last month, amid a round of womenswear summer sales and as a run of falling food prices reached its longest stretch for 15 years.
CPI has been hovering around zero since February, providing an extra boost to households as wage increases accelerate. Latest pay data tomorrow is expected to show a further improvement.
The Bank of England expects CPI – which fell below zero in April for the first time in more than 50 years – to turn higher later this year as the effect of falling oil and food prices fades.
But the Bank’s long-term task, set by the Government, is to keep inflation stable at around 2%.
Mr Carney told the committee that goal remains at the forefront of his plans.
He said: “Our job is to bring inflation back to 2% in the next two years.”
Mr Carney indicated that although a hike in the base interest rate was moving closer, it was likely to remain much lower than in the past.
He said: “I see no scenario in which they would move towards historic levels.”
Recommended for you
