Carney shoots down speculation of rate increase

BANK OF England Governor Mark Carney (pictured) has hinted that there will not be an increase in the base rate for some time, which could spell good news for peer-to-peer lending platforms.

His comments came less than a week after it was revealed that three members of the Monetary Policy Committee (MPC) voted to increase the 0.25 per cent rate during the June meeting.

Read more: Low interest rates spell more bad news for savers

Counter to speculation, Carney warned that uncertainty over Brexit and the wider economy would keep the interest rate at its historic low.

“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],” said Carney.

“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.”

Read more: Savers urged to look for cash alternatives as inflation hits new high

June has been a tumultuous month for the economy, thanks to a combination of low rates, political uncertainty, and inflation rising to a four-year high of 2.9 per cent. This has led to frustration among savers, who are now unable to find any inflation-beating cash accounts on the high street.

However, this could be a boon for P2P platforms, many of which offer interest rates of four per cent and above. Low interest rates have sent yield-hungry investors flocking towards the sector and with no rate hike in sight, this appears likely to continue.

Read more: Savers hit by “toxic combination” of low rates and rising inflation

Concluding his speech, Carney said that monetary policy “cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU”, but added that the Bank of England could use the base rate to influence how “the hit to incomes is distributed between job losses and price rises”.

Immediately following his speech, the value of the pound fell by approximately 0.4 per cent against the dollar.