Britain is “more than halfway towards the finish line” as the country’s economy continues on the road to full recovery from the global financial crisis, the Bank of England governor has said.
Mark Carney even signalled that better than expected growth over the successive quarters had built up momentum going forward, with expectation that the economy would grow by 3.5% this year.
He told the Sunday Times: “Wherever the finish line was in the depths of the crisis, we are much more than halfway towards that finish line now.
“The expansion is proceeding, momentum is more assured; the very fact we have had consistent quarters of growth in line with, or slightly better than, our forecasts shows that.”
It comes after the bank released its inflation report this week,with an upgraded forecast for gross domestic product (GDP) growth for this year from 3.4% to 3.5%, and from 2.9% to 3% for next year.
But policy-makers halved the UK’s pay growth forecast for 2014 from 2.5% to a below-inflation 1.25%. Official data showed annual pay fell by 0.2% in the three months to June, the first decline recorded since the height of the financial crisis in 2009, and a worse drop than the bank had been expecting.
On the wage drop, Mr Carney, who took over as governor last July, added he would not wait for pay to catch up with the cot of living before putting interest rates up.
“We have to have the confidence that prospective real wages are going to be growing sustainably (before we raise interest rates) – we don’t have to wait for the fact of that turn to raise them,” he told the paper.
An interest rate hike is now seen as more likely in February 2015, when rates will have been held at 0.5% for nearly six years. They were slashed in 2009 in a bid to try to nurse the economy back to health.
Meanwhile, unemployment is expected to fall more quickly than it had previously thought, dropping below 6% this year, while inflation is expected to continue to hover below its 2% target for the next three years.