The Bank of England is in no hurry to move interest rates because a number of uncertainties cloud the economic outlook, Governor Mervyn King signalled today.
In testimony to parliament's Treasury Committee, King said that the UK economy continued to experience steady growth and low inflation and not that much had changed since the forecasts it made at the time of the May Inflation Report.
He said those forecasts had implied an interest rate rise would be needed at some point in order to keep inflation on target and so it was no surprise that the market yield curve had moved up after the report was published.
But he said that there had also been big falls in stock prices since then and sterling was at a higher level, which would tend to have a disinflationary impact on the economy.
'A degree of uncertainty has entered the economic landscape. That has been brought into focus by the recent turbulence in financial markets,' he said. 'After a period of unusually strong growth in the world economy, a rebalancing of global demand is desirable but it is unlikely to be smooth,' he added.
Economists said the testimony only cemented the view that the Bank of England would keep interest rates on hold for the 11th month running.
King also noted that inflationary pressures had risen around the world, including in low-cost China while in the US this seemed to be combined with evidence that growth was slowing.
