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REPEAT: Carney: Equilibr Rate Up; Staying Still Adds Stimulus

MNI (London)
Repeats Story Initially Transmitted at 18:38 GMT Oct 13/14:38 EST Oct 13
--Carney On CNBC Restates MPC Line Rate Hike May Be Appropriate In Coming Mos
By David Robinson
     LONDON (MNI) - Bank of England Governor Mark Carney reasserted the line
agreed by the majority on the Monetary Policy Committee that an interest rate
hike could be appropriate "in coming months."
     In an interview on CNBC Friday, Carney said that equilibrium interest rates
were rising around the world, so staying put on policy would add stimulus. His
comments will reinforce markets central expectation that the MPC will hike Bank
Rate at its November meeting.
     Carney said that since the Brexit referendum in June last year, the MPC has
been "providing a lot of stimulus to the economy ... and we have been willing to
tolerate inflation being over target."
     The MPC trade-off has been to accept higher inflation in order to support
employment and economic activity. 
     Carney said that UK unemployment was now at a 42 year low and "we are
running out of that spare capacity and that tolerance for having inflation over
target."
     He said that the majority on the MPC, and he included himself in that
group, believed "it may be appropriate to make some modest adjustment to
interest rates, to raise interest rates ... in coming months."
     Carney said that the MPC would take policy one step at a time and he noted
the uncertainty over the impact of the Brexit process, which was likely to hit
both demand and supply. 
     He said that the monetary policy response to Brexit was not mechanistic, as
it depends in part on what happens to the exchange rate.
     With the global economy picking up, and around 75% of it growing above
potential "that means the equilibrium interest rate is starting to move up which
means (for policy) ... if you are standing still you are becoming more
stimulative," Carney said.
--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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