China's headache will not affect rate rise plan, says BoE’s Mark Carney
The Bank of England’s (BoE) agenda still includes a likely rate rise in spite of China's economic meltdown, Governor Mark Carney has said.
A decisive Monetary Policy Committee meeting at the end of the year will still go ahead in the face of global stock markets being hit hard by the movements of the Shanghai share index, with Carney claiming “recent events” wouldn't force a change in strategy.
Interest rates at 300-year low
The lengthy period of low interest rates in the UK, with a 300-year-low of 0.5%, is thought to be coming to an end soon.
Carney said the BoE's decision about when to start increasing rates will come into "sharper relief around the turn of this year."
With the current timetable put in place before the latest upheavals, many borrowers might have thought they would get a stay of execution before rates went up.
Carney said there are "profound disinflationary forces at work" in the global economy. He also claimed there is no sign of a deflation mentality active in the UK economy.
"In the UK, for example, despite several months of zero or mildly negative inflation rates, there is no evidence of the development of a deflationary mindset among businesses and households," the BoE governor said at a central bankers’ convention in Jackson Hole, Wyoming in the US.
"Consumer confidence is at its highest level in over a decade and retail sales have been growing at well above past average rates," he continued. "Firms’ investment intentions are robust."
Explaining that the direct exposure of the UK economy to China is "relatively modest", Carney said the current upheavals "are unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert."