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Carney softens bank rules and defends jobless link to rates
by Chris Marshall on Aug 28, 2013 at 13:45
He said it was within the Bank of England’s remit to bring inflation back to target more slowly when necessary. ‘With a depressed level of output and inflation above target due to temporary factors rather than demand pressures, this is such a time.’
He also sought to assuage concerns from savers, expressing ‘tremendous sympathy’ for the millions of people who are struggling to combat inflation with low rates on their bank accounts.
‘They have done the right thing, set money aside, and now they are earning returns that are substantially below what they would have expected,’ he said.
‘But raising interest rates now is not the answer – instead what savers need is a stronger economy. That will mean higher asset prices, and will allow interest rates to return to normal levels in a sustainable way.’
Jobs outlook 'solid not stellar'
In his closely scrutinised address, Carney said a ‘solid not stellar’ outlook for the labour market was among reasons why it could take ‘some time’ for unemployment to fall enough to prompt a change in monetary policy.
He added that well over three-quarters of a million new jobs would need to be created. With the shrinking of the public sector, this would require over a million new jobs in the private sector, he argued.
Finally, the Canadian acknowledged a recovery in growth does not necessarily mean faster job creation and lower unemployment.
Overall Carney said there were ‘bumps in the road ahead’ for the UK economy even amid signs that that ‘this recovery is broad based and set to continue’.
‘Developments at home and abroad suggest that conditions are in place for growth to be sustained into the medium-term – though at a pace that is likely to be measured rather than rapid.’
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