Now is not yet the time to raise interest rates, Carney says

Now is not yet the time to raise interest rates, the Governor of the Bank of England, Mark Carney, said.

Carney listed six reasons why the 'shocks' which the Old Lady on Threadneedle Street were facing were different to those the US Federal Reserve was up against.

He was speaking on Tuesday at Queen Mary University, London, on Tuesday.

For starters, in the Governor's opinion cost pressures Stateside were stronger than in the UK, rising well above their historical averages.

On top of that, the UK economy was twice as open as America's, leaving it more exposed to economic weakness in the rest of the world and so-called pass-through effects from a stronger currency.

Finally, the UK was undergoing the largest reduction in government spending within the OECD space, not to mention that the BoE's ability to employ macroprudential measures meant it had less need to use monetary policy.

To boot, after having risen short-term interest rates in the US were only at the same level as in Britain.

The Bank's two-year time horizon to return inflation to its 2% target was a reflection of the need to balance strong private domestic demand versus sustained headwinds from overseas and ongoing fiscal consolidation, Carney said.

"External factors – including a strong exchange rate and subdued global price pressures – can be expected to exert a persistent drag on UK inflation.

"To offset this drag from abroad, domestically-generated inflationary pressures must rise. But this process must be sustainable; that is, it should not come at the expense of future, excessive volatility in employment and output," the central banker said in a statement.