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BoE's Carney dampens expectations for May rate hike, sees 'mixed' data

Published 04/19/2018, 04:20 PM
© Reuters. The Governor of the Bank of England, Mark Carney, speaks to the Scottish Economics Forum, via a live feed, in central London

By Andy Bruce

LONDON (Reuters) - Bank of England Governor Mark Carney on Thursday dampened widespread expectations for an interest rate hike in May, pointing out there were also "other meetings" this year.

Sterling dropped almost a cent against the U.S. dollar to its lowest level since April 9 on the back of the comments, in which Carney highlighted "mixed" economic data.

"I don't want to get too focused on the precise timing, it is more about the general path," Carney told BBC news, while adding that a rate hike this year was "likely".

He said Britain should prepare for "a few interest rate rises over the next few years".

A firm majority of economists in a Reuters poll published earlier this week said they expect the BoE will raise interest rates to a new post-financial crisis high of 0.75 percent in May.

Figures this week showed Britain's unemployment rate fell to a 42-year low, but inflation dropped more sharply in the first quarter than the BoE had expected. Retail sales data for March also disappointed on Thursday.

"We have had some mixed data ... We'll sit down calmly and look at it all in the round," Carney said.

"I am sure there will be some differences of view but it is a view we will take in early May (at the next meeting of the Bank's Monetary Policy Committee), conscious that there are other meetings over the course of this year."

Carney also said uncertainty around Brexit had prevented what would otherwise have been a "surge in investment".

"Unfortunately that means in the short term that the speed limit (of the British economy) is not increasing. Productivity is not increasing, which will limit the rate at which people's wages can pick up."

Ultimately, the outcome of Britain's divorce talks with the European Union would be the biggest factor in economic decisions in the coming years, Carney said.

© Reuters. The Governor of the Bank of England, Mark Carney, speaks to the Scottish Economics Forum, via a live feed, in central London

"And then we will adjust to the impact of those decisions in order to keep the economy on a stable path," he said.

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