Bank of England governor Mark Carney has moved to quell fears interest rates could be on the rise soon.
In a speech to the Economic club in New York, Carney (pictured) indicated the Bank would use a variety tools other than interest rates to control the UK economic recovery. He said one of his biggest challenges was to stop the housing market from quickly moving from ‘stall speed to warp speed’.
Carney said it would be wrong ‘to rush to a more extreme response’ when high unemployment and slow growth in major export markets continued to be a problem.
Earlier this year Carney said interest rates would remain at historic lows until unemployment fell to around the 7% mark and he does not see it hitting this level any time soon.
‘It is unlikely that equilibrium interest rates will return to historically normal levels any time soon,’ Carney said.
‘The prospect of low interest rates for a long time puts a premium on macroprudential policies and financial reforms to manage the associated risks without abandoning the needs to keep interest rates in line with the equilibrium level.’
While Carney expects the economy to fulfil the ‘hope and dreams of the holiday season’, this Christmas he sounded a note of caution.
‘The Ghost of Christmas Past should not be forgotten. A recovery may be gaining pace but our economies are a long way from normal. Borrowing is still high and weak demand for advanced economy exports could persist for some time,’ he said.