The Bank of England (BoE) should not begin raising interest rates, the bank's governor Mark Carney said at a speech in London on Tuesday (19 January). "Now is not yet the time to raise interest rates," he said in what was his first public address of the year.
"The world is weaker and UK growth has slowed. Due to the oil price collapse, inflation has fallen further and will likely remain very low for longer," he continued.
Last week, the BoE kept interest rates unchanged at a record low 0.5%, after revealing the rate-setting Monetary Policy Committee voted 8-1 in favour of not raising interest rates, and Carney added Threadneedle Street officials were closely monitoring a number of parameters before lifting interest rates. "Given the scale of foreign disinflationary pressures, current domestic cost growth is not yet consistent with a firming in underlying inflation," he said.
"The MPC must remain vigilant for signs that low inflation is having second-round effects in the wage bargain, possibly via inflation expectations."
Carney added that with oil prices at a 12-year low and disappointing figures on the pay growth front, the BoE would not rush into following the example set by the US Federal Reserve, which lifted interest rates for the first time in almost a decade in December 2015.
Figures released earlier on Tuesday 19 January showed consumer price inflation (CPI) grew at its fastest pace in 11 months in December 2015. On a year-on-year basis, CPI rose by 0.2% in the last month of 2015, generally in line with analysts' expectations and up from the 0.1% recorded in November, driven higher by movements in transport costs, particularly air fares and, to a lesser extent, motor fuels.
The figure marked the first time since January 2015 that the rate of growth on annual basis exceeded 0.1% in 2015.