Bank of England Governor Mark Carney has said that now is not the time for an interest rate hike, while wages continue to stagnate and the impact of Brexit on the economy is unclear.
Speaking after three Bank policymakers called for a rate rise amid warnings that Brexit-fuelled inflation is set to surge further over the summer, Mr Carney said “now is not yet the time to begin that adjustment”.
Delivering his delayed Mansion House speech, Mr Carney said: “Different members of the Monetary Policy Committee will understandably have different views about the outlook and therefore on the potential timing of any Bank rate increase.
“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.”
The Canadian said he would like to see if falling consumer confidence is offset by other components of demand, whether wages begin to “firm”, how the economy reacts to “tighter financial conditions”, as well as the reality of Brexit negotiations, before considering any rate hike.
Last week the MPC kept interest rates on hold at 0.25%, but Ian McCafferty, Michael Saunders and Kristin Forbes all voted for a rise to 0.5%, marking the first time three members have dissented for more than six years.
It came after inflation hit 2.9% in May - its highest level in nearly four years and far higher than expected.
The pound sank on the news, falling 0.4% against the dollar and euro to 1.26 and 1.13 respectively.