Quoted in an interview published today with the Belfast Telegraph newspaper
The recent strength of sterling reflects the relative strength of economy. But if it’s going to persist we need to improve productivity and that goes back to businesses investing. The issue for business is to continue for the plans they have put in place to build the productivity and the currency should settle over time
We don’t know what time period he is referring to but it confirms his dilemma of a stronger pound keeping a lid on inflation yet not helping exporters. Yesterday’s improved business investment data would have pleased him but it doesn’t solve the problem
Asked when interest rates will go up Carney replied
We don’t know. The short answer is that the guidance we are giving to households and businesses and the discussion we had in the other room is that because of the variety of big forces that are acting on our economy – heavily indebted households, governments that are consolidating debt, a weak export partner in Europe, strength of the currency, changes to the financial system, all the big forces that are here today and will remain in the immediate term – the appropriate path for interest rates is likely to be limited increases in interest rates at a gradual pace. The exact timing of the start of that process will be determined by the evolution of the economy
adding
I’m focussed on achieving our objectives. Withe MPC that’s making sure that inflation gets to target in a way that’s consistent with a durable expansion.
Full interview here
The Treasury Select Committee last week rightly questioned the value of Carney’s forward guidance given that the goal posts seem to moving rather more than was first anticipated. These comments and others this week, including his effective retraction of his Mansion House speech timeline on rate hikes, do little to change that view.
The jury remains out on the start of the interest rate rises and will do so for some time to come yet.
