Buy-to-let Interest rates could go either way

Bank of England governor Mark Carney has suggested an interest rate hike is more likely this year if wage growth outstrips expectations.

Speaking to the press after the launch of the Bank’s inflation report and monetary policy update, Carney said the Bank has assessed the resilience of the UK economy after the latest interest rates cut and saw that the economy could cope with interest rates being held at record lows.

He says: “We can see scenarios in either directions [rates hike or cut]. We have made some important assessments in this forecast on the excess capacity in the economy.

But he adds if wages grow faster than expected then a rate rise might be needed, though he cautioned his remarks were “not a signal”.

The pound had fallen to $1.2548 at one point during Carney’s press conference, down 0.9 per cent from its earlier highs.

Despite a fall in unemployment, growth in wages has been broadly stable in recent quarters, coming in at 2.3% in the fourth quarter of 2016, the Bank’s February inflation report notes.

Carney has used today’s events to signal that the bank’s next interest rate move will probably be a hike. It’s hard to understate how much of a turnaround that is from where we were in the immediate aftermath of the EU referendum. The Bank’s post-referendum rate cut was an attempt to pre-empt a downturn that hasn’t occurred.