LONDON—The Bank of England dampened expectations that interest rates in the U.K. will be raised imminently as Governor Mark Carney said the country’s economy has only begun heading back to normal.
While unveiling the bank’s quarterly economic projections, a cautious Carney noted that despite a drop in the unemployment rate to its lowest level in five years, progress must be made in reducing extra capacity in the economy.
The British economy is still smaller than it was in 2008, following a deep recession brought on by the global financial crisis.
“As time has moved on and the recovery has been sustained, the economy has edged closer to the point at which bank rate will need gradually to rise,” Carney said. “The exact timing will inevitably be the subject of considerable speculation and interest.”
Even when that’s achieved, Carney said borrowing rates will most likely rise only gradually. The bank’s benchmark interest rate stands at a record low level of 0.5 per cent. It has stayed there for over five years.
Carney, who hails from Canada, resorted to a sporting analogy to explain his logic, comparing the British economy to the international soccer championship the World Cup.
“Securing the recovery is like making it through the qualifying rounds of the World Cup. That is an achievement, not the ultimate goal,” he said to reporters. “The real tournament is just beginning and its prize is a strong, sustained and balanced growth.”