Yahoo Finance Mark Carney doubles down on likely interest rate rise in face of 'inflationary' Brexit
Bank of England governor Mark Carney has doubled down on language signalling a likely rate rise for the first time in a decade in the coming months.
In a speech in Washington, Mr Carney reiterated that "some withdrawal of monetary stimulus" could be needed to bring inflation back towards its 2% target.
The Governor said Brexit was likely to push up inflation in the short term as fewer workers from overseas came to the UK, making it more difficult for employers to recruit and so pushing up wages. He said globalisation had previously helped keep a lid on price growth.
“On balance, the de-integration effects of Brexit can be expected to ... be inflationary,” he said.
He cautioned that any rate rises would be at “a gradual pace and to a limited extent”.
The pound dipped slightly after Carney’s comments, but held the bulk of its gains from last week when rate rises were first mooted by the Bank, helping sterling hit a post-Brexit high against the dollar.
On balance, the de-integration effects of Brexit can be expected to ... be inflationary
Mark Carney
UK inflation has gathered pace this year, hitting nearly 3pc, as the fall in the value of the pound leads to higher prices and reduced household spending power.
Despite his comments about Brexit, Mr Carney said changes to immigration levels would only have a “modest impact” on prices in the longer term.
He also described Brexit as “an example of ‘reculer pour mieux sauter’”, a French saying that means stepping back in order to jump better
Mr Carney made the comments as part of a lecture at the International Monetary Fund (IMF) headquarters in Washington, DC.
The Bank of England’s next update on monetary policy is scheduled for November 2.
