Last summer I said that the decision as to when to start raising Bank Rate would likely come into sharper relief around the turn of this year. Well the year has turned, and, in my view, the decision proved straightforward: now is not yet the time to raise interest rates. This wasn’t a surprise to market participants or the wider public. They observed the renewed collapse in oil prices, the volatility in China, and the  4  Refers to non-farm business sector unit labour costs in the US and unit labour costs based on the MPC’s backcast in the UK. 5  Where openness is measured by the share of exports in GDP. 6  Vlieghe (2016), Rachel and Smith (2015), Carney (2013) and Carney (2010). BIS central bankers’ speeches  5  moderation in growth and wages here at home since the summer and rightly concluded that not enough cumulative progress had been made to warrant tightening monetary policy. The outlook for monetary policy depends on three things: the MPC’s objectives, its strategy, and the UK’s economic prospects. Our objective is clear: to return inflation to the target in a way that avoids undue volatility in output and employment. The MPC’s strategy for achieving the inflation target varies over time, and it depends on the nature of shocks hitting the economy and the risks facing the economy.
Chart 3: Credit growth coming back into line with GDP growth in the latest data Credit growth relative to GDP growth Credit growth relative to GDP growth (3-year trailling average)  15 10  1969 1971 1973 1974 1976 1977 1979 1981 1982 1984 1985 1987 1988 1990 1992 1993 1995 1996 1998 2000 2001 2003 2004 2006 2007 2009 2011 2012 2014  0 -5  Percentage points  5  -10 -15 -20 Source: Bank of England. BIS central bankers’ speeches  3  That said, increased vigilance is merited given the softness in nominal GDP growth, the stillelevated levels of household debt relative to income, the large current account deficit and pockets of more buoyant activity in areas such as Buy-to-Let mortgages, unsecured consumer credit and commercial real estate. More fundamentally, it doesn’t take a genius to recognise that a prolonged period of low and relatively predictable interest rates could encourage the build-up of excessive risks. That’s why the Bank is monitoring risks closely and has taken action where appropriate.