LONDON Aug 16 Bank of England Governor Mark
Carney said in a newspaper interview he would not have to wait
for real wages to turn positive before raising interest rates.
Carney signalled during the Bank's quarterly inflation
report on Wednesday that it remains on course to raise interest
rates from 0.5 percent early next year but only if wage growth
He told the Sunday Times: "We have to have the confidence
that real wages are going to be growing sustainably (before
rates go up). We don't have to wait for the fact of that turn to
He also warned that some British banks may have to raise
extra capital as a result of the regulator's stress tests which
will be published in the autumn.
Banks have, however, made "substantial progress" on the road
to normality, he added.
Both the economy and the banking system are now "much more
than halfway towards that finish line," he added.
Carney also defended a loophole that is being exploited by
Britain's banks to duck a European cap on bonuses worth more
than 100 percent of salary. They have been paying cash
"allowances" to their top performers to get round the cap. The
governor said that these allowances, if properly designed, could
In the interview, conducted on Wednesday, Carney also said
the pound's 17 percent gain from its low in March 2013 would not
prevent a rate rise. "Even with . . . that appreciation,
inflation gets back to target by the end of the forecast period
because slack narrows," he said.
Carney would be "comfortable" being the first of the big
four central banks to increase rates after the financial crisis.
"Monetary policy is heading in a different direction in at least
two of the four. . . We will do what we need to
do," he said.
Next week's publication of the minutes of the Bank's August
policy meeting about a tightening of monetary policy this year
might show at least one policy-maker cast a first vote in favour
of a rate hike, potentially putting markets back on alert.
(Reporting by Stephen Addison; Editing by)