The MPC member and Dep Gov speaking on the BBC’s World This Weekend radio programme re-iterating previous comments in March at the top-end of his forecasts that Carney was inclined to support at the time
The bank rate averaged about 5% in the decade or so before the crisis.
It’s reasonable to think that given the headwinds that are still out there as well as some the global forces that perhaps the level that we go to three or five years out might a couple of percentage points below that
And he also warned again that if rises are to be gradual then starting sooner rather than later may be prudent and might provide economic advantages
There’s a case for moving gradually because we won’t be quite certain about the impact of tightening the bank rate given everything that has happened to the economy.It might not operate in quite the same way as before the crisis. So that’s an argument if you like for being a bit cautious, moving in baby steps to avoid making mistakes.
If you want to pursue that strategy you need to start taking those baby steps a bit earlier, otherwise you end up being behind the curve.
Nothing really market-moving in the comments but it does highlight again the difficult balancing act the BOE has. 3% interest rates could double many people’s mortgage payments and that would be crippling, as I have said before.
