Bank of England Governor Mark Carney today said he had “tremendous sympathy” for millions of savers but ruled that higher interest rates must await recovery.
Responding to protests from pensioners and others who were relying on their nest eggs to provide an income, he said they had “done the right thing” but would have to wait longer before rates could return to more generous levels.
The new head of the Bank was challenged by an MP during his first major grilling by the Treasury Select Committee.
Tory Brooks Newmark asked if he was telling people whose savings were being whittled away by low rates that it was “a price worth paying” for economic stability.
Mr Carney replied: “With respect to savers, and the pensioners in your constituency and across the land, we do have tremendous sympathy for the situation they find themselves in.
“They have done the right thing, they set aside money, now they see returns much lower.”
He promised: “With growth will come higher interest rates for those savers. One of the things we have seen in the last few months... has been an increase in longer-term interest rates.”
The governor said consumers and firms had taken on board the Bank’s plan to keep interest rates low until unemployment drops below seven per cent — his new policy called forward guidance.
“The economy is picking up and the stimulus is working... and while it’s early days, we expect as well that we are consistent with the path to returning inflation to two per cent,” he told the committee.
Mr Carney said the Bank would consider providing more help for the economy if recovery weakened.
“If recovery were to falter, if additional stimulus were to be required, we would consider whether to provide additional stimulus.”
He said: “The economy is picking up and the stimulus is working. We are moving in the direction of the unemployment target.”
He added: “Our job is to make sure that [recovery is] not another false dawn that we saw a few years earlier, and to make sure that as soon as possible this economy reaches a form of sustained velocity so that it can sustain higher interest rates and continue to grow.”
