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BoE China Woes Unlikely To Stop UK Rate Rise

BoE China Woes Unlikely To Stop UK Rate Rise

China's economic slowdown is "unlikely to change" plans to increase interest rates in the UK, the Governor of the Bank of England has said.

The Chinese concerns which have rocked financial markets this week have fuelled expectations that rate increases might be put on hold in the short term.

Around £74bn was wiped off the value of the UK's FTSE 100 companies in the two days following this week's Black Monday crash.

But in the second half of the week, London's top-flight share index bounced back and saw its biggest rise in nearly four years.

Speaking at an annual get-together of central bank bosses in Jackson Hole, Wyoming, Mr Carney said that the current concerns over China were outweighed by the "ongoing domestic strength" of the UK market, credible policy and an "increasingly robust financial system".

"The direct exposure of the UK economy to China is relatively modest," he said.

"Developments in China are unlikely to change the process of rate increases."

The cost of borrowing has remained at 0.5% for more than six years.

In July, the Governor hinted that interest rates would rise by early 2016, claiming that they would probably go up slowly and reach a level "about half as high as historical averages" of 4.5%.

He warned then that shocks to the economy and shifts in the exchange rate could affect the pace and size of any increases.

Meanwhile, a survey from industry group EEF says almost half of UK manufacturers are concerned by signs of a China slowdown.

Big manufacturing firms were most likely to be worried, and also more likely to be looking at their business plans to take into account different scenarios, the survey showed.

"Overall, UK factories send only a small proportion of their goods to Chinese customers, but a sharper slowdown would also see a halt to growth in export sales through supply chains in Europe," said EEF chief economist Lee Hopley.

"The more widespread impact, at least in the near term, is likely to be the knock to already delicate confidence levels. Time will tell whether this takes a further toll on growth across the sector."