INTEREST rate hikes will be gradual and limited, Bank of England Governor Mark Carney has said.
Mr Carney said the rise will be steady due to headwinds facing the economy taking time to die down.
He admitted the point at which interest rates begin to normalise is getting closer, but added rates will need to be lower than in the past to keep the economy operating at its potential.
He said: "The precise timing of the first rate rise is less important than our expectation that, when rates do begin to rise, those increases are likely to be gradual and limited."
He highlighted muted demand in major export markets, the ongoing battle to repair the deficit, and a debt-laden private sector as factors in limiting rises.
Mr Carney added: "All of these factors likely mean that, even when spare capacity is used up, bank rate will need to be materially lower than in the past in order to keep the economy operating at its potential and inflation at its target."
Economists predict the Bank's monetary policy committee will vote to hike interest rates from the record low of 0.5 per cent at its meeting in February.
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