Interest rates could fall as the economy suffers 'post-traumatic stress' of Brexit, says Mark Carney

Written by Josh May on 1 July 2016 in News

The Governor of the Bank of England, Mark Carney, has said interest rates are likely to be cut this summer

The Governor of the Bank of England, Mark Carney, has said interest rates are likely to be cut this summer in response to the “economic post-traumatic stress disorder” caused by the decision to leave the EU. 

The Bank of England has downgraded its growth forecast for 2017 from 2.3 per cent to 1.6 per cent in the wake of the referendum result.

Carney warned during the campaign that a Brexit vote could tip the UK’s economy into recession, and he said today his warnings were being vindicated.

“The Bank has identified the clouds on the horizon and can see that the wind has now changed direction,” he said in a speech from the Bank of England.


The Brexit fallout will make bittersweet history

Lord Heseltine says Boris Johnson has "ripped the Tory party apart"

JP Morgan predicts Scotland will be independent by 2019

He added: “All this uncertainty has contributed to a form of economic post-traumatic stress disorder amongst households and businesses, as well as in financial markets.”

However, Carney stressed that the Bank of England is not powerless to respond and signalled that the Monetary Policy Committee could cut interest rates further from their record low level of 0.5 per cent.

“In my view, and I am not pre-judging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.”

Carney was attacked by Leave campaigners, among them Andrea Leadsom, who has since put herself forward as a candidate to be prime minister.

Leadsom in May said the forecasts were “incredibly dangerous”, adding: “As an ex-Goldman Sachs banker Carney knew exactly what he was doing.

“He has encouraged financial instability and I think that absolutely damages the reputation of the Bank.”

The Governor was asked whether, if Leadsom was chosen to lead the country or became chancellor, he would have to resign. “The exact opposite,” he replied.

“What we said in terms of the risks to the economic outlook, in terms of the risk to financial stability, does anyone in the room not think that those risks have begun to manifest?

“Does anyone in the country think that those risks have not begun to manifest? So we did our job; we identified the risk.”

He added: “It would be irresponsible for me or any of my other colleagues to walk away from those obligations.”

UKIP leader Nigel Farage, however, was unconvinced, tweeting “Mark Carney once again talking down Britain.”



Related Articles

Campaigners urge ministers to ensure National Investment Bank boosts low carbon infrastructure
15 December 2017

Environmental campaigners welcomed plans for £340m in capital funding for the National Investment Bank, while urging ministers to ensure it helps develop Scotland’s low carbon...

Budget 2017: Environmental groups question North Sea tax break
23 November 2017

Oil industry welcomed news that Philip Hammond will allow the tax history of oil and gas fields to be transferred after a sale, allowing buyers to claim greater relief when it comes to...

Fergus Ewing urges UK government to "come clean" on plans for fisheries policy after Brexit
10 November 2017

First Minister Nicola Sturgeon claims the UK Government has not honoured promises to share information on the progress of Brexit negotiations

Share this page