Bank of England Governor Mark Carney said on Tuesday that interest rates are set to rise at a gentle pace and the slowdown seen in the first quarter was temporary.
Speaking to lawmakers, Carney said households expect rate hikes over the course of the year. They also expect the bank to proceed at a very gentle pace.
At the Treasury Committee hearing on the May Inflation Report, Carney said the guidance set out by the bank is conditional on the economic outlook. The economy did not evolve broadly in line with the forecast in the first quarter.
According to the Office for National Statistics, the economy grew only 0.1 percent in the first quarter.
Carney told MPs that snow has disrupted activity disagreeing with the ONS comment that the impact of snow was very small.
He said the slowdown in the first quarter was largely due to temporary and idiosyncratic factors.
Another Monetary Policy Committee member Gertjan Vlieghe said he expects one or two quarter point rate hikes per year over the three-year forecast period. He added that interest rates will go up very gradually over the next few years.
Vlieghe said the Brexit vote had a ‘dampening effect’ on UK growth.
Michael Saunders, who voted for a 25 basis point rate hike at the May MPC meeting, told lawmakers that consumer credit data was weak and he wanted to wait and see developments in household spending.