BoE Will Tighten Policy Only Against Far Stronger Economic Backdrop, Says Dale

(RTTNews) - The Bank of England will raise interest rates but only against a far stronger economic backdrop, chief economist Spencer Dale said Friday.

"We will tighten policy only when we are well along the road to recovery," Dale said in a speech to the Confederation of British Industry.

The interest rates will rise at some point. "But only against a far stronger economic backdrop, when your output is higher, your order books are fuller, and you and your customers are better able to withstand a rise in borrowing costs," Dale said.

Governor Mark Carney introduced forward guidance in August, which implies that the central bank will not hike interest rate at least until the unemployment rate has fallen to a threshold of 7 percent.

Dale said the policymakers are fully aware that extraordinary low interest rates are likely to be needed for some time yet.

He noted that the durability of the recovery will depend on the baton of growth being handed over to the corporate sector, whose spending and investment will help to foster stronger growth in productivity and real incomes.

Regarding housing market, Dale said the UK housing market has a sort of microwave type quality to it, with a tendency to turn from lukewarm to scalding hot in a matter of a few economic seconds.

Earlier this week, Carney said the housing market has a history of shifting from "stall speed to warp speed".

After a meeting at the French Treasury in Paris, Carney said Friday that the shadow banking in emerging markets poses biggest risk to global market.

Carney, who is also chairman of the Financial Stability Board said it is necessary to push through reforms in emerging markets. An essential element of that reform will be to agree the amount and location structure of "bail-in-able" debt for systemic institutions.