Speaking at Queen Mary University of London, he said that despite previously anticipating a rate rise around the turn of this year, "the decision proved straightforward: now is not yet the time to raise interest rates".
Reasons included the renewed collapse in oil prices, the volatility in China, and the moderation in growth and wages in the UK since the summer.
Mark Carney said:
"The world is weaker and UK growth has slowed. Due to the oil price collapse, inflation has fallen further and will likely remain very low for longer. This may mean modestly weaker cost growth through this year, with the likely path for inflation, both headline and core, softer as a result. In short, recent developments suggest that the firming in inflationary pressure we had expected will take longer to materialise."
Carney noted that "this journey doesn’t have a set timetable; only an expected direction of travel".
He added that despite a US Federal rate rise last month, the UK economy is twice as open as the US and is therefore more exposed to global weakness.
He continued:
"Recall that, despite an expansion that started two years before our own, the Fed has only raised rates to our lofty level of ½ %. This last point is not facetious. As my MPC colleague Jan Vlieghe argued in a speech yesterday, a variety of structural factors have likely depressed the so called equilibrium interest rate, or the rate consistent with the economy operating at full employment and inflation at target. Bank staff have estimated many of these drivers. In my long-held view, rate rises, when they come, are likely to proceed at a gradual pace and to a limited degree for some time."
David Lamb, head of dealing at forex specialists FEXCO, commented:
"The prospect of a UK interest rate rise hasn't been kicked into the long grass. The Governor hoofed it right out of the park.
"Mark Carney's prediction - made last summer - that we would have greater clarity on interest rates at the start of 2016 has been completely overtaken by events.
"Six months on, the prospects for UK interest rates remain as clear as mud.
"Even though UK inflation crept up a notch to a paltry 0.2% in December, tumbling oil prices will continue to drag down prices. Against a backdrop of extreme Chinese volatility and slipping rates of both growth and wages in the UK, none of the stars are aligned for a rate rise any time soon.
"With a UK rate hike now receding into the distance once again, monetary policy in London and Washington will continue to move in opposite directions.
"As a result the Pound has tumbled against the Dollar, and it is even slumping against the Euro too.
"The combination of skittish equity markets and the vanishing prospect of a rate hike means investor appetite for Sterling is eroding - and as a result the Pound's gradual slide is likely to continue."
