No rush to raise rate of interest says Bank of England

He said “now is not yet the time” to hike rates from their historic low of 0.5 per cent following turmoil in financial markets as oil prices have plunged and China’s economic slowdown has spooked investors.

In a speech at Queen Mary University of London, Mr Carney said a rise in UK rates will “depend on economic prospects, not the calendar”.

The outlook has changed dramatically since last summer’s prediction that the decision to raise rates would come into sharper relief at the turn of the year, he said.

He added: “The world is weaker and UK growth has slowed. Due to the oil price collapse, inflation has fallen further and will likely remain very low for longer.”

He said “unforeseen disturbances” meant the path for interest rates “cannot be preordained”.

“That means we’ll do the right thing at the right time on rates,” he said.

His speech comes after the International Monetary Fund (IMF) once again slashed its global growth forecast, while data from China also showed the country’s economy growing at the weakest pace in 25 years. The United States last month hiked raised rates for the first time in nearly a decade as America’s economy expanded strongly last year. But this does not mean the UK will follow suit with a rate rise soon, Mr Carney said.

Britain’s export industry is more exposed to the weakening global economy than America, inflation is lower on these shores and the UK is also undergoing hefty spending cuts as the Government seeks to tackle the deficit, according to Mr Carney. Rates staying lower for longer is good news for home-owners, but will come as a further blow to savers, who have seen their nest eggs whittled away by record low rates since the 2008 financial crisis.