Bank of England: Rate hike is moving closer

Bank of England Governor Mark Carney says timing of first rate hike in United Kingdom gets closer, while British Finance Minister George Osborne rules out financing Greece bailout

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

As the British economy keeps recovering, it has been expected that it would be one of the first developed countries to hike its historically low interest rates since the financial crisis in 2008. Bank of England (BoE) Governor Mark Carney said on Tuesday, that the first British interest rate hike was moving closer.  

Although the BoE is expected to hike rates gradually, Carney warned households that they should prepare themselves for higher borrowing costs.

"The point at which interest rates may begin to rise is moving closer with the performance of the economy, consistent growth above trend, a firming in domestic costs, counterbalanced somewhat by disinflation imported from abroad," Carney told a parliamentary committee.

The British interest rates have been at record low of 0.5 percent for more than six years. While economists consider a rate hike would be possible by early 2016, investors mostly expect the first hike mid next year. In a separate announcement earlier on Tuesday Britain’s inflation rate fell back to zero in June.

Meanwhile, according to Reuters, British Finance Minister George Osborne ruled out any kind of financial involvement in the third bailout for Greece, which has been approved after 17 hours of talks with the eurozone finance ministers.

"The idea that British taxpayers money is going to be on the line in this latest Greek deal is a non-starter," said a source from the finance ministry, who spoke on condition of anonymity. In 2011, Britain refused to allow the use of the European Financial Stabilisation Mechanism (EFSM) to bail out Greece for a second time.

The use of the EFSM can be decided by a qualified majority of European Union states, which are 15 countries representing 65 percent of the EU's population.

TRTWorld and agencies