The Bank of England will raise interest rates in “small, slow increases” Governor Mark Carney has said.

Here’s the key phrase from the BofE’s statement today:

Inflation is close to the MPC’s 2% target and is projected to remain close to the target in the period ahead.  As slack has been absorbed, financial market expectations of the date of the first Bank Rate rise have moved forward.  But when Bank Rate does begin to rise, the pace of rate increases is expected to be gradual, with rates probably remaining below average historical levels for some time.

Here’s Carney’s prepared remarks:

Unemployment has fallen sharply and is now expected to drop below 6% by the end of the year and to
around 5.5% by the end of the forecast period – a marked reduction relative to our expectations in
May.

The MPC expects inflation to remain at, or slightly below, 2%, before reaching the target at the end of
the forecast period.

As I said in Glasgow recently, as the economy normalises, Bank Rate will need to start to rise in order
to achieve the inflation target.

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