The UK’s very British economic recovery, dominated by London housing in particular and the consumer more generally, continues to strengthen. The Bank of England argued in its latest Inflation Report last week that there was no case yet for higher interest rates, and repeated its previous guidance that rate rises, when they come, will be very gradual.
But Governor Mark Carney spelled out much more clearly than ever before that he is now concerned about the risks to financial stability posed by the housing sector, and he came very close to promising that the Financial Policy Committee will take regulatory steps to dampen the market at its meeting in June.
The UK housing market is therefore shaping up to be the first major test of the new macro prudential weapons that the central banks now have at their disposal. The need for these new arsenals is very apparent, but it is much less clear whether they will actually work. Read more >>