Testifying before a treasury select committee in London Tuesday, Bank of England Governor Mark Carney reiterated that the current, record-low interest rates in the U.K. are likely to continue “for some time.”
His comments come just days after the central bank trimmed its growth and inflation forecasts, and its monetary policy committee voted 8-1 to keep rates unchanged.
“Even with limited and gradual rate increases it still will be a relatively low interest rate environment,” Carney reportedly said.
U.K. interest rates have been held at 0.5 percent since March 2009. Given the current weak pace of growth and continuing negative inflation, most economists do not expect the bank to raise rates until at least the second quarter of 2016.
“The question in my mind is when the appropriate time for interests to increase and that is strongly consistent with the strength of the domestic economy,” Carney added.
Following the dovish comments from Carney and Bank of England Chief Economist Andrew Haldane -- who also testified before the committee -- the pound touched its lowest level in two weeks versus the dollar, dropping to 1.5101 before recovering slightly to $1.5123.
Stock markets however did not react to the testimony, with the FTSE 100 continuing to trade down nearly 1 percent.
“Both Carney and Haldane sounded dovish and confirmed the stance the BOE took in the recent Inflation Report,” Roberto Mialich, a senior foreign exchange strategist at UniCredit SpA in Milan, told Bloomberg. “In the near term, there are still downside risks for sterling considering this picture.”
Referring to Haldane’s recent discussion of scrapping cash altogether in favor of a digital currency to boost spending, Carney said that it was merely “a thought experiment.”
“There are no plans to abolish cash at the Bank of England,” Carney reportedly said, during his testimony.