-Mark Carney, BoE Governor
Bank of England Governor Mark Carney hinted that UK interest rates could rise "at the turn of the year", adding that any lift in borrowing costs would be gradual and would not reach the pre-crisis level. Carney said he expected interest rates to rise over the course of next three years from the current level of 0.5%. Carney's comments puts the UK central bank on track to follow the US Fed by hiking interest rates in the near future, after more than six years at record-low levels amid the fallout of the global financial crisis. Hence, there is now a strong possibility that August's meeting could see a renewed split among the nine BoE policy makers for the first time this year. In the second half of last year, before inflation began to fall due to sharply lower oil prices, MPC members Martin Weale and Ian McCafferty voted for higher rates. However, Carney added gathering inflation pressures would become more apparent towards the end of the year as the effect of falling oil prices drop out of the annual inflation rate.
BoE Governor also acknowledged the risks to the UK's economic outlook, including its large current account deficit which argued for a "right policy mix" that includes tight fiscal policy.
© Dukascopy Bank SA