BoE's King: Markets Have Jumped Gun on Interest Rates
Outgoing Bank of England Governor Mervyn King said that markets have "jumped the gun" about when central banks are likely to start raising interest rates after the U.S. Federal Reserve signaled a timetable for ending its bond purchases.
Yields on U.S. and other government debt leaped last week when Fed Chairman Ben Bernanke said the U.S. central bank might start reducing its bond buying later this year and possibly end it by mid-2014.
King said the markets had overinterpreted these comments.
"I think people have rather jumped the gun thinking this means an imminent return to normal levels of interest rates. It doesn't," he said in his final appearance as governor before parliament's Treasury Committee on Tuesday.
"The Federal Reserve has merely said that the easing, in which it is still engaging, may taper at some point depending on economic conditions."
King added that economic growth would need to be stronger before interest rates could rise.
"The view that we are definitely at the beginning of the end, that we are definitely at the point where we need to raise interest rates, I think is a premature judgment about where we are, and no central bank has moved rapidly down that course," he said.
King is due to retire from the Bank of England at the end of June and will be replaced by Canadian Mark Carney.
(Read More: Currency War Could Heat Up When Carney Joins BoE)
King, who has long argued that rules for banks need to be tightened in response to the financial crisis, said senior British politicians had come under "tremendous pressure" from lenders over the reform push.
"There were certainly calls made to No.11 (the finance minister's office) and even in some cases to No.10 (the prime minister's office) to try to put pressure on supervisors to modify, be more reasonable in their judgment," he said.