The fear of a further financial crisis and the resultant risk-averse behaviour by markets around the world explain the slower than expected rate of recovery and why interest rates have remained low, he told an audience of businesspeople and academics in a speech at the Open University in Milton Keynes.

UK interest rates are not forecast to reach 2% until 2019, Mr Haldane said, and are predicted to rise by nine basis points over the next five years.

“Growth in the UK remains solid. Robust private sector demand has been a key contributor, with household consumption growing steadily for two years, largely funded by a pick-up in real incomes. 

"Despite some signs of slowing, business investment has also remained robust. We have seen a reasonable, and reasonably balanced, recovery.”

Mr Haldane expects world growth to remain around its historical average for the next few years. Inflation will return to 2% by 2017. The reason is a “half-empty” mindset among businesses and consumers.

He said: “The evidence so far during 2015 suggests this pattern may continue. Caution is a plausible explanation for this dragging anchor.

"This cautious behaviour is, to a degree, also mirrored among companies. This can be seen in the weakness of global investment since the crisis.”

Company borrowing is at its lowest level but weak investment levels fuelled by uncertainty has been a continuing drag on global recovery.

Companies have invested more over the past 20 years in passive assets such as cash than active ones such as physical capital, a trend accentuated since the crisis, Mr Haldane said.

“Business confidence has risen in lockstep with profits. But this good news has been banked, not invested. ”

Interest rates in the UK will not reach 2.5% until 2025, he added. “My judgement on the appropriate monetary stance in the UK is relatively little altered from earlier in the year. The current level of interest rates remains, in my view, appropriate to assure the on-going recovery and to insure against potential downside risks to demand and inflation.

“Looking ahead, I have no bias on either the size or direction of future interest rate moves. Trying too hard to unstick interest rates or doing so too quickly runs the risk of making a difficult situation worse.

"That is one reason why the glue holding interest rates to their floor has remained so strong and I feel no immediate need to loosen that glue.”  

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