LONDON (Reuters) - Bank of England Governor Mark Carney said on Thursday it was possible that British interest rates will be higher in a year’s time, although the central bank would not raise them too soon and risk slowing the economy.
Speaking a day after the BoE cut its forecasts for British economic growth, Carney said British inflation could turn negative imminently, and that the strength of sterling was dampening economic growth slightly.
Asked in a BBC radio interview if record low interest rates were likely to be higher by this time next year, Carney said: “It’s possible, but it depends on the evolution of the economy.”
“What we’re not going to do is put up interest rates too soon or too fast and slow the economy.”
Wednesday’s quarterly economic outlook from the BoE cautiously backed bets in financial markets that it will only start to raise interest rates in around a year’s time.
Carney told the BBC that the central bank thought inflation may turn negative “next month”, albeit only briefly, before rising again by the end of the year.
He added that Britain’s economy would continue to face headwinds from the weak global economy, the government’s fiscal policy and the strength of sterling -- which on Thursday hit a six-month high against the dollar.
“We get a bit of a dampening (on growth) from the currency, the strength of the currency,” Carney said.
Interest rates, which have stood at a record low 0.5 percent since early 2009, are more likely to move up than down, and will rise in a gradual and limited manner, Carney reiterated.
The BoE governor also told the BBC it was important that the British government provide clarity on how it will proceed with a planned referendum on the country’s membership of the European Union.
Reporting by Andy Bruce, editing by William Schomberg and Toby Chopra