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Business is key to recovery, says Carney

17 Feb 2014

Bank of England Governor, Mark Carney, spoke recently about the role of business in the economic recovery.

A ‘consumer-led recovery’ must be followed by a greater rate of investment by businesses, he said, before he would consider it appropriate to raise interest rates. The Bank had previously planned that interest rates could be allowed to rise once unemployment had fallen to 7%, a figure very nearly reached two years sooner than expected.

Other factors influencing the Bank’s interest rate decision are bonuses for banking staff, which Mr Carney feels should be deferred for a number of years. He said, ‘There should be an ability and an expectation that a firm takes back compensation if an individual is found to have taken risks or if there are conduct issues’.

In an effort to control inappropriate bonuses, the Bank of England now has powers to step in and limit payments if any bank is found to have insufficient capital.

Interest rates will remain at their current rate of 0.5% for the foreseeable future, only rising when there is sustainable growth in jobs, incomes and spending.