Thursday, 29 June 2017

Carney says to debate rate rise 'in the coming months'

The Bank of England is likely to need to raise interest rates as the British economy comes closer to operating at full capacity, and will debate this "in the coming months", BoE Governor Mark Carney said on Wednesday.

Speaking at a European Central Bank conference in Portugal, Carney said that policymakers would need to look at the extent to which stronger business investment offset a slowdown in consumption, as well as growth in wages and labour costs.

"These are some of the issues that the MPC will debate in the coming months," Carney said. "Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional."

The BoE's Monetary Policy Committee split 5-3 earlier this month on whether it was time to start to raise British interest rates from a record-low 0.25 percent. Carney voted to keep rates steady.

The Dow Jones Industrial Average, rose 111.82 points, or 0.52 percent, to 21,422.48. The S&P 500  gained 12.46 points, or 0.51 percent, to 2,431.84. The Nasdaq Composite, added 21.90 points, or 0.36 percent, to 6,168.53.

U.S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash.

"Would I say there will never, ever be another financial crisis?" Yellen said at a question-and-answer event in London.

"You know probably that would be going too far but I do think we're much safer and I hope that it will not be in our lifetimes and I don't believe it will be," she said.

Yellen said it would "not be a good thing" if reforms of the financial services industry since the crisis were unwound, and urged those who had helped manage the fallout at the time to be vocal in preventing such a dilution.

U.S. President Donald Trump has said during his election campaign that he would cut banking regulation. The U.S. Treasury Department earlier this month proposed easing up on restrictions big banks now face in their trading operations.

Yellen declined to comment when asked about her relationship with Trump but said she had a good working relationship with U.S. Treasury Secretary Steve Mnuchin.

She also reiterated her view that the U.S. central bank would continue to raise interest rates only gradually.

"We think it will be appropriate for the attainment of our goals to raise interest rates very gradually to levels that are likely to remain quite low, although there is uncertainty about this, to remain low by historical standards for a long time," she said.

She said the stockpile of bonds the Fed amassed to help the U.S. economy through the crisis would be shrunk "gradually and predictably."

Asked about share price valuations by a member of the audience, Yellen said "by standard metrics, some asset valuations look high but there's no certainty about that."

Reference: Reuters

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