WASHINGTON, D.C., UNITED STATES (SEPTEMBER 18, 2017) (IMF TV) – Bank of England Governor Mark Carney said on Monday (September 18) that Brexit is likely to hurt Britain’s growth prospects in the short term and push up inflation as the country adjusts to life outside the European Union.
In a speech that immediately drew criticism from some Brexit supporters who have previously criticized his stance on the EU, Carney warned that Britain would face a cost for reworking its trade relationships.
In the short term, the weakening of trade ties with its EU partners would not be offset by new agreements with other countries, he said, as he repeated his argument from last week that interest rates would probably need to rise soon.
Brexit supporters say the freedom to strike new trade deals is one of the big advantages of leaving the European Union.
Diane James, an independent member of the European Parliament who was briefly leader elect of Britain’s anti-EU UKIP party, took aim at Carney.
“Mark Carney blaming inflation on Brexit. Does he not realize that QE and ZIRP are the major causes?,” James said on Twitter, referring to the BoE’s stimulus programs.
Carney angered many Brexit supporters before last year’s referendum by saying leaving the EU would probably hurt the economy. Although growth held up immediately after the vote, it has slowed sharply this year.
Carney also said that less openness to foreign markets and fewer workers coming to Britain would put upward pressure on inflation and reduce productivity, raising the prospect of higher interest rates ahead.
“On balance, the de-integration effects of Brexit can be expected to … be inflationary,” he said. “At present, the main question concerns the extent to which this adjustment has been brought forward.”
Britain’s inflation rate has accelerated this year, due in large part to the fall in the value of the pound since the referendum decision in June 2016 to leave the EU.