Mark Carney hints at New Year decision on rate rise
Bank of England governor Mark Carney has reiterated his view that the decision on an interest rate hike "will come into sharper relief around the turn of the year" despite an increase in risks from the global economy.
Mr Carney said turbulence from outside the UK had "intensified" after a period in which markets have been convulsed by fears of a slowdown in China.
But he told MPs on the Treasury Select Committee that the UK was experiencing "robust" growth despite weak global expansion and that a decision on a rate rise would crystallise should this continue as expected.
Mr Carney pointed to an expected scenario of continued growth in gross domestic product (GDP) as well as wages and a firming up in underlying inflation.
He said: "Then the decision comes into sharper relief and it may become appropriate to begin to withdraw stimulus."
An increase would mean higher repayment costs for borrowers but provide some relief for savers whose nest eggs have been eaten away by the rock-bottom Bank rate of 0.5% for more than six years.
Inflation has been hovering around zero for most of this year but some Bank of England policy makers think that underlying cost pressures are building, fuelling the argument for lifting rates. The Bank targets inflation at 2%.
Mr Carney's apparently "hawkish" remarks come on the same day that official figures showed regular pay increases at 2.9%, the highest level for more than six years – and in real terms rising at the strongest pace for more than a decade.
The governor acknowledged that risks from China had "intensified" though he said the impact on the UK of a big slowdown in its growth over the next few years would be "modest".
There could be gains to consumers through "higher real incomes" as falling world commodity prices feed through to cheaper goods meaning wages are worth more.
Models suggested growth at 3% lower than expected for China over the next couple of years would knock 0.3% off global growth and drag UK expansion down by 0.1% a year. However there were potential unknown effects on confidence and "contagion" to other markets.
Mr Carney acknowledged scepticism about official Chinese growth data, saying there was likely to be "more underlying volatility" in the economy than the numbers suggested.
More on AOL Money:
Bank of England keeps interest rates at 0.5%
New £20 note will be plastic
Interest rate fears fuel drop in confidence
