February 12, 2015 / 11:38 AM / 3 years ago

Bank of England's Carney speaks after inflation report

LONDON (Reuters) - Bank of England Governor Mark Carney is speaking at a news conference after the Bank published its quarterly Inflation Report on Thursday.

The Bank expects stronger growth on the back of lower oil prices but sees little need to raise interest rates this year and could even cut them if inflation proves weaker than expected, the report showed.

Below are comments from Carney at the news conference:

SEE NO DEBT-FUELED GROWTH

"Even though we have a fairly robust outlook for consumption, the savings rate holds up in this forecast, so this is not a debt-fueled expansion in our forecasts."

LOW INFLATION

"We're going to have a period where headline inflation is low - very low - for most of this year, and that's a good thing in general because of the causes of it. It's not a good thing if it persists though."

STIMULUS

"The important point, which is entirely from a contingency or risk-management perspective, is to underscore that if we were in a situation, which we are not in at the moment, but if we ever were in a situation where we needed to provide additional stimulus, we have many options.

"The effectiveness of the stimulus is reinforced by the relative health of the financial system as well."

PRICES AND WAGES

"We will continue to look at the breadth of the changes in prices, we'll look at the persistence there. We will obviously monitor inflation expectations very closely.

"We will watch developments on the wage front as well to the extent that wage patterns start to be affected."

RATES

"What is consistent with our objective of returning inflation within the next two years, it does require some limited and gradual increases in interest rates over the forecast horizon.

"It's pretty clear in terms of our central expectation that most likely next move in monetary policy is an increase in interest rates."

RATE CUT POSSIBILITY

"On the downside, the MPC is vigilant to the risks of disappointing global growth or any signs that low inflation begins to affect inflation expectations and wage growth, and therefore becomes self-reinforcing.

"Were these downside risks to materialize, the Committee could adjust the pace and degree of Bank Rate increases, expand the Asset Purchase Facility, or cut Bank Rate further towards zero."

NOT IN LOCKSTEP WITH FED

"We're not in a situation where ... monetary policy in the UK would move either in lockstep or follow closely behind that of the Fed in the U.S. ... and I don't think there's confusion about that in the market."

DEPUTY GOV MINOUCHE SHAFIK ON NEGATIVE CASH RATES

"There are two main risks of going negative. One is the risk of people reverting to cash ... and also the worry about what happens to money markets when rates are negative."

MARKETS UNDERSTAND BOE

"What markets have been doing since our last forecast in November is that they adjusted their expectations around the pace and degree of rate increases.

"The market understands in general what the MPC is trying to do."

GREECE

"Recognizing that this is a hypothetical question, would a change in Greece's position have an impact on the forecast? Yes. Would it have the same impact on the UK economy as it would have had on 2012? No. There are differences now than there were in 2012."

ONE-OFF PRICE FALLS

"The headlines today mask stronger underlying dynamics which will determine UK output and inflation tomorrow. Despite the new headwinds from geopolitics and deleveraging, modest global growth is expected to continue.

"With the effects of these large one-off falls in prices likely to dissipate within a year, we will look through them.

"(It is) appropriate to return inflation to target as quickly as possible after the affects of energy and food prices movements have abated."

FASTEST GROWTH

"The combination of raising wages and falling energy and food prices will help household finances and boost the growth of real take-home pay this year to its fastest rate in a decade, this will support solid growth in consumer spending."

NO LEAK CONCERNS

"I have absolutely no reason to have those worries. There's been adjustments, there's always been adjustments in markets in terms of expectations of stance or policy.

"Our future forward OIS curve is quite flat and so relatively modest moves can translate into relatively large moves."

OVERSHOOT

"Using the curve at the time when we conducted the forecasts, which is the time at which we took our policy decision last week, you did have that slight overshoot."

Reporting by London bureau, compiled by Hugh Lawson

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