Bank of England governor Mark Carney has told businesses not to “worry that the rug is going to be pulled out from under you too soon” in attempt to boost confidence in light of a future rise in interest rates, and stressed the importance of monetary policymakers getting out of London and talking directly to businesses.
Speaking to the Nottingham Post following his speech at the East Midlands Conference Centre yesterday, Carney said interest rates needed to remain low for a prolonged period in order to help firms invest. Raising them too soon would “choke” recovery, he added. “First and foremost, it is all about confidence”.
Speaking about his meeting with business leaders the day before, Carney thinks that they understand the messages the Bank is attempting to convey – “they said it gave them some of the certainty they needed”.
The governor said he had chosen Nottingham as the location for his speech because it’s “not over-weighted with finance – we get enough of that in London”. The area is also well connected to other areas in the UK and big employers like Alliance Boots, Experian and Rolls-Royce. However, he admitted that there is a two-tier economy, with conditions in the East Midlands not “as good” as in the South East.
What can we do? First, a central bank controlling monetary policy has to control the whole economy. The short answer is that there is not much we can do.
But that said, think about where we are at the start of this recovery and what the condition would be under which we would tighten policy.
First we are giving guidance. Wait until unemployment comes down to seven per cent. That is actually going to be determined more in regions like the East Midlands than in London.
Carney expects to return to Nottingham – “bellwether of the broader British economy” – in the future, and hinted that he may be putting pressure on other members of the Monetary Policy Committee to get out of the City more.
Carney also reiterated that the seven per cent unemployment threshold for raising interest rates was not a target but a staging post – “it should ultimately fall well below that level”.