Expectations that UK interest rates will rise in May could be overblown, the governor of the Bank of England has indicated.
Mark Carney said that while more rate increases would be coming over the next few years, some of the recent economic data had been softer and inflation had fallen faster than the Bank’s policymakers were predicting in February.
“I don’t want to get too focused on the precise timing – it is more about the general path,” Carney told the BBC. “We have had some mixed data. On the softer side, some of the business surveys have come off. Retail sales have been a bit softer – we are all aware of the squeeze that is going on in the high street.”
Investors and City economists are widely predicting that the Bank’s monetary policy committee will raise interest rates from 0.5% to 0.75% at its next meeting in May. However, speaking in Washington, the governor suggested it was not a foregone conclusion and said there would be more data to consider before the meeting.
“We’ll sit down calmly and look at it all in the round,” he said. “I am sure there will be some differences of view, but it is a view we will take in early May, conscious that there are other meetings over the course of this year.”
Carney added: “The biggest set of economic decisions over the course of the next few years are going to be taken in the Brexit negotiations and whatever deal we end up with. And then we will adjust to the impact of those decisions in order to keep the economy on a stable path.”
The Bank raised interest rates for the first time in a decade in November 2017, taking the headline borrowing rate to 0.5% from 0.25%.
Official figures published on Wednesday showed that inflation had fallen unexpectedly to 2.5% in March from 2.7% in February. It was the lowest level in a year.
Bank of England policymakers will now be looking to the next major piece of UK economic data, when the Office for National Statistics publishes first-quarter UK growth figures next week.