Bank of England's Carney Sees Slower Growth Ahead
January 16 2017 - 2:32PM
Dow Jones News
By Jason Douglas
LONDON -- Bank of England Gov. Mark Carney said Monday he
expects the British economy to slow this year as accelerating
inflation squeezes consumer spending.
In his first speech of 2017, Mr. Carney said growth in the
economy is being led by households, who appear vulnerable to
quickening price increases fueled by a weak pound. Sterling has
fallen around 18% against the dollar since voters chose in June to
exit from the European Union.
"At present, households appear to be entirely looking through
Brexit-related uncertainties," he said in remarks prepared for
delivery at the London School of Economics. But he said rising
prices will likely crimp their spending, which, combined with
subdued business investment as corporate executives await more
detail on the shape of the U.K.'s future relationship with the EU,
will probably mean slower-than-average growth in the U.K. over the
next few years.
He reiterated the BOE's message from late 2016 that officials
are prepared to raise interest rates to contain inflation if
price-growth looks set to stay persistently above their 2% annual
target, or to cut borrowing costs if the growth outlook weakens
markedly.
Mr. Carney was speaking ahead of a much-anticipated speech
Tuesday by Prime Minister Theresa May, who is expected to set out
more details of her Brexit strategy.
The pound fell Monday to its lowest level against the dollar in
three months as investors concluded she will likely signal
prioritizing immigration control over unfettered access to European
markets for British goods and services. Mrs. May has said she would
begin formal divorce talks with the EU before the end of March.
The bulk of Mr. Carney's remarks Monday focused on managing the
trade-off central banks face between inflation and growth.
The U.K.'s experience in recent years has shown the value of
giving officials some discretion on how to balance that trade-off,
he said. Some economists instead advocate requiring central banks
to follow strict rules on when to raise or lower interest
rates.
Write to Jason Douglas at jason.douglas@wsj.com
(END) Dow Jones Newswires
January 16, 2017 14:17 ET (19:17 GMT)
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