In a speech last week, the BoE governor signalled the start of rising official interest rates in the UK is likely to begin around the end of 2015. Mark Carney, the former chief of the Bank of Canada, said the decision to raise rates would need to be addressed “by the turn of this year” but in doing so he made several qualifications; “headwinds to growth and inflation remain”, important parts of the UK economy were running below their historical averages, the pound has risen appreciably and fiscal policy was tightening, all of which detract from inflationary pressures. He then addressed the likely trajectory of UK rate rise by saying the path to “more normal levels…will be longer and shallower than those of the past” and interest rate rises would proceed to a level”about half as high as historical averages.”
