LONDON (Reuters) - Euro zone weakness will be only one factor that helps to determine when the Bank of England raises interest rates, Governor Mark Carney said in media interviews broadcast on Monday.
Carney told U.S. news channel CNN that weakness in the euro zone and elsewhere had been a major theme at the International Monetary Fund’s meetings in Washington last week.
But Britain’s recovery had been driven primarily by domestic factors.
“The only difficulty that is caused by Europe is that it provides an additional drag on growth. But that doesn’t dictate the monetary policy of the Bank of England,” he said.
Financial markets have recently pushed back their bets on when the BoE will start to raise interest rates, with interest rate future contracts pricing in a first hike in mid-2015.
As well as the weakness in Britain’s core export markets such as Germany, investors also believe very slow growth in pay for British workers will stay the BoE’s hand for now.
Carney said the BoE had already forecast that Britain’s rapid recovery would slow slightly toward the end of 2014, and would continue to keep a close eye on domestic inflation pressures that might come from the labor market.
Carney said in a separate interview with CNBC television that the central bank would take into account the fact that weaker global demand was producing a “very benign global inflationary environment”.
He said the slowdown in Europe’s recovery did not compare with the scale of the crisis in the single currency zone in recent years when Greece was at risk of dropping the euro.
“This is a chronic phase of European adjustment,” Carney told CNBC. “We’re not back in the acute phase, back into that period of a couple of years ago.”
Reporting by David Milliken and William Schomberg Editing by Jeremy Gaunt