Bank of England Governor Sees Weak Wage Growth Delaying Rate Rises

Michel Barnier will lead the EU side of negotiations

Michel Barnier will lead the EU side of negotiations

Mark Carney said he would want to see how businesses, financial markets and consumers reacted to the reality of the UK's looming departure from the European Union before changing his view.

There were no significant warnings over the inflation outlook which will cause some concerns that tolerance to higher inflation has increased.

Speaking to London's banking community alongside finance minister Philip Hammond a day after Brexit talks started, Carney cited weak wage growth, mixed signals on consumer spending and business investment as reasons for not moving to raise interest rates any time soon.

"In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the reality of Brexit negotiations", he stated.

Carney's speech, which was supposed to be delivered at a banquet at Mansion House on Thursday but was put off out of respect for the victims of the Grenfell Tower blaze, came shortly after three of the eight members of the hitherto decidedly dovish monetary policy committee voted to raise interest rates.

"Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption", he said.

Carney also underlined the importance of trade liberalisation - especially in financial services - and said it was unclear if Britain's large current account deficit was yet on a sustainable footing.

"On the positive side, the deficit is funded in domestic currency and financial reforms have increased the resilience of the United Kingdom system, thereby making larger imbalances more sustainable".

Latest News