It was less than a month ago that the Canadian head of the Bank of Englend head, Marc Carney, suggested a rise in interest rates from a historic low of just 0.5% was imminent. But just a few weeks on he is tempering those expectations. As the UK economy remains sluggish, as too few new jobs have been created, Carney has begun singing another tune--rate hikes will be further off than expected.
The flip flop on such a basic question in such a short time has resulted in some harping from the hoi polloi. The UK business press recently suggested Carney is acting like an "unreliable boyfriend" when it comes to predictions about when it is bond holders might be able to make some money.
But those in the bank are taking care to dampen expectations about interest rate rises. Retiring deputy BofE governor for monetary policy, Sir Charlie Bean, has said it is "reasonable" to assume that interest rates will not return to the long-term historical average of 5% for as long as a decade. "It might be reasonable to think that in that long term you would go back to 5% but it's probably quite a long way down the road," Bean was quoted as saying.
Last week Mark Carney, urged people to focus on the "big picture" rather than obsess about when interest rates would rise. The BofE leader suggested homeowners and businesses assume that rates were likely to "stabilise at about 2.5% in three years' time, rather than the historically 'normal' level of 5%."