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Deputy governor defends his boss

Carney ‘misinterpreted’ on interest rates says Broadbent

Ben BroadbentThe Bank of England’s deputy governor Ben Broadbent leapt to the defence of his boss today over accusations that he gave the wrong impression that interest rates would rise early next year.

Mr Broadbent said it was the media that had interpreted Mark Carney’s speech that way and that he made no such prediction.

Speaking on BBC Radio Five Live the deputy governor said Mr Carney had only said that economic factors would come into focus at that time.

In a speech at Lincoln Cathedral Mr Carney gave what was interpreted by the media and the markets as his clearest hint yet that the cost of borrowing would go up early next year.

He said: “The decision as to when to start such a process of adjustment will probably come into sharper relief around the turn of this year.”

Mr Broadbent said that it would be “foolish to pre-announce” a date for an interest rate increase.

His comments came after the Bank’s Monetary Policy Committee voted this week to keep rates at their historic low of 0.5%. The cost of borrowing has remained unchanged for 78 months.

“We [the MPC] are responding to things that are essentially… unpredictable,” he said.

“And that means that it would not just be impossible, it would be foolish to pre-announce some fixed date of interest rate changes.”

Mr Broadbent said he saw no “urgency” to increase interest rates at present.

He added: “The economy clearly is recovering, but we had the most almighty financial crisis and there is still a bit of spare capacity left.

“There is not that much inflationary pressure at the moment, [although] we expect that to build over time.”

The Consumer Prices Index, the most commonly used measure of inflation, fell to 0% in June. With little sign of inflation rising significantly, and the economy still experiencing some spare capacity, policymakers believe there is no pressure to raise rates.

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