LONDON — The Bank of England governor cautioned Tuesday that now is not the right time to raise interest rates, particularly given the collapse in oil prices and volatility in China.
In a speech at Queen Mary University of London, Mark Carney ruled out an immediate rise in rates from their record low of 0.5 percent. Carney said the path for rates "cannot be preordained," and that it would depend on economic prospects, not the calendar.
"We'll do the right thing at the right time on rates," Carney said, arguing that there hasn't been enough cumulative progress in the economy for a hike.
The remarks came only hours after the Office of National Statistics reported that Britain's consumer price inflation rate rose to 0.2 percent in the year ending in December, up from 0.1 percent in the year ending in November. That level is well below the 2 percent target, minimizing pressure on policymakers to hike rates.
Carney had promised in July that the end of 2015 would bring more clarity as to when interest rates would rise. Since then, oil prices have dipped below $30 a barrel, China's economy has reported its weakest growth rate in 25 years and the International Monetary Fund has slashed its global growth forecast.
"The world is weaker and UK growth has slowed," Carney said. In other words, the economy is less strong than anticipated last summer.
Analysts suggested that Carney's remarks put him firmly in "wait and see" mode. Howard Archer, of the IHS Global Insight, said the remarks could "only fuel belief that the Bank of England will not be raising interest rates before late-2016, and could delay acting until 2017."
Even though the United States last month hiked interest rates for the first time in nearly a decade, Carney noted that the Federal Reserve only raised rates to "our lofty level of ½ percent." Carney was at pains to note that conditions in America were different than Britain, and offered no timeframe for a rise.
"In my long-held view, rate rises, when they come, are likely to proceed at a gradual pace and to a limited degree for some time," Carney said.