12:10am Thursday 3rd April 2014
Exclusive By Andy Richardson
INTEREST rates could increase ahead of the next General Election, the Governor of the Bank of England told The Northern Echo, but he wants to see more jobs created in the North-East before he will intervene.
During his first fact-finding mission to the region, where he met business leaders and a class of GCSE business studies students, Mark Carney warned bankers they need to be more professional to repair their shattered public image.
"I'm not sure bankers need to wear sackcloth, but nor should they jump back into wearing Gucci suits," said the Canadian, who wants a shake-up of the system to avoid taxpayers ever again being called upon to bail out collapsed lenders.
"There needs to be an improvement in terms of banker conduct," he added. "Some institutions have made real progress but it need to be industry wide.
"Banking needs to be treated more as a profession. We also need to improve infrastructure, both in how markets are organised and the codes of conduct behind markets."
Mr Carney's visit to the North-East began at Longfield Academy, Darlington, where he spoke to students, before he met business leaders at Emirates Durham ICG in Chester le Street and at the Sage music centre in Gateshead.
The Governor said interest rates rises would be "gradual" even though Britain's economy is growing faster than any of the world's developed nations.
He reassured householders and businesses that he wants the region to reap more benefit from the London-led recovery, which has seen house prices in the capital rocket to a record high and unemployment fall to seven per cent, while the North-East was blighted by the highest jobless rate and some of the lowest house prices in the UK.
"We are one year into a recovery, but it is an uneven recovery," the Governor said.
"Our job is to help turn this into a strong, sustainable and balanced expansion. This is not about getting back to where we were in 2008, our aspirations are much higher.
"The point is that if a recovery is just based in the South-East it is neither sustainable nor balanced. It has to include the North-East."
"We are here to make policy for the UK as a whole.
He added: "There is still slack in the labour market, you can see that here and right across the country. We need to use up more of that slack before we raise rates."
Any increase in the rate of interest would be welcomed by savers but Mr Carney accepted it would be a very unpopular move with mortgage payers.
Asked if he would rule out a rise before next Spring's election, he said: "No, absolutely not.
"We will set policy as appropriate to meet our core responsibility to meet the two per cent inflation target. We haven't set timing conditions on when that will be.
"We have been as explicit as we can about the nature of adjustments to interest rates, but we cant be specific. But we are absolutely clear that it will happen independent of the political cycle.
"We will take the decision when we need to.
"When you raise interest rates it is a welcome sign. I share my colleague Charlie Bean's view that it is confirmation the economy is recovering after some very difficult years.
"I'm not sure we will get a lot of cards or letters to thank us, but we will do it when it needs to happen."
Financial analysts have criticised the Bank's forecasts, made under the so-called forward guidance policy, for being wildly inaccurate, having predicted average UK unemployment would not fall to seven per cent until 2016 - a threshold that is set to be hit within months.
Asked if the job of being Bank of England Governor was proving tougher than he expected since he succeeded Sir Mervyn King in July last year, Mr Carney said: "It's been more interesting than I expected and I'd like to think its more rewarding."
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