Bank of England Governor says the time is not right for a rate rise, Tony Freeman investigates

On 20^th June 2017, the Bank of England’s Governor said that now is not the right time for an interest rate rise. He argued that the economy in the UK is too weak to support higher borrowing costs.

In his Mansion House speech, he said, “”From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment [rate rises].

“In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.”

With Brexit negotiations now underway in Brussels, the Governor stressed that the UK and EU will need to ‘negotiate mutually beneficial transitional arrangements to avoid unnecessary disruption’.

Following the Bank of England governor speech the pound fell to $1.266, a drop of 0.4 per cent against the dollar and against the Euro

He made it clear that the success of Brexit depends on whether the two sides can agree a ‘transition’ arrangement.

All eyes are on the Brexit negotiations and what effects the deal will have on the economy and businesses.