During a speech on Thursday the 16th of July, the Bank of England governor Mark Carney said that an interest rate rise ‘will likely come into sharper relief around the turn of this year.’
He added that the path would be much more important than the precise timing of the first rate increase and that interest rate increases would rise slowly to a level in the medium term that is about half as high as the historical average of 4.5%.
Carney said that were interest rates to rise in line with expectations, over half of UK mortgagors would pay higher rates in one year’s time, and close to 75% of mortgagors would be paying more in two years’ time.
Carney said: ‘Given these considerations, the MPC will have to feel its way as it goes, monitoring a wide range of indicators and adjusting the pace and degree of Bank Rate as it learns about the effects of higher interest rates on the economy. There is, in fact, a wide distribution of possible outcomes around any expected path for Bank Rate, reflecting the inevitability that the economy will be buffeted by shocks and that monetary policy will have to adjust accordingly.’
