Bank of England Governor Mark Carney said Britain’s planned Brexit deal would help the country’s economy, but “almost existential” worries about global trade wars might prevent the BoE from raising interest rates.
Carney said the deal, which still faces a key vote in Britain’s parliament on Saturday, was “good news” because it means Britain could avoid what the BoE has warned would be a major economic shock: dropping out of the EU with no transition.
Britain is due to leave the EU on Oct. 31, more than three years after voters shocked investors and employers by opting to take the country out of the world’s biggest trading area.
In an interview with Bloomberg Television at a meeting of the International Monetary Fund, Carney said clarity on Brexit would help to revive business investment that has fallen sharply since the 2016 referendum.
In a separate interview with the BBC, Carney said Prime Minister Boris Johnson’s deal might not help the economy to the same extent as his predecessor Theresa May’s plan, which proposed closer ties with the EU but was rejected by parliament.
Asked if securing a Brexit transition meant the BoE would resume raising rates, Carney said: “Not necessarily. I’m not going to pre-commit, there is a lot of contingencies there.”
He said the IMF had stressed the precarious nature of the world economy, which has prompted other central banks including the U.S. Federal Reserve and the European Central Bank to provide more stimulus.
“We have to take that into account. How much momentum is there in the global economy?” Carney said.
His comments echoed a statement by the BoE after its policy meeting in September when it said it expected to raise rates gradually, as long as a no-deal Brexit shock to the economy was avoided and global growth picked up.
Later on Friday, Carney said that in 16 years of attending meetings at the IMF he had never seen the level of concern among global finance chiefs about barriers to trade.
Asked to sum up the mood at the gathering, Carney described it as “the almost existential uncertainty about the structure of the trading system.”
The IMF this week warned that the U.S.-China trade war will cut 2019 global growth to its slowest pace since the financial crisis, and things could get a lot worse if the trade tensions remain unresolved.
Source: UK Reuters