BoE’s Carney: UK economy is operating just below potential with inflation just above the target

Bank of England's governor, Carney, has stated that the UK economy is operating just below potential with inflation just above the target.

Key quotes:

• Policy uncertainty, protectionism could push down on global equilibrium interest rate, exacerbate concerns about monetary policy limits.
• Surveys indicate that the UK economy is stagnating in Q3, underlying growth is likely positive but muted.
• Weak UK business investment is a warning to others of the potential impact of persistent trade tensions.
• Believes it is more likely to be appropriate to ease monetary policy than not after no-deal Brexit.
• Says the ability of monetary policy to smooth no-deal Brexit hit would be constrained by limits to MPC tolerance of above-target inflation.
• The possibility of no deal Brexit has increased, but it is not a given.
• Extended Brexit uncertainty could raise the prospect of softer domestic inflation and resurgent imported inflation.
• 'Limited and gradual’ rate hikes likely to be needed if there is a Brexit deal.

About the BoE

Mark Carney is Governor of the Bank of England and Chairman of the Monetary Policy Committee, Financial Policy Committee and the Board of the Prudential Regulation Authority. His appointment as Governor was approved by Her Majesty the Queen on 26 November 2012. The Governor joined the Bank on 1 July 2013.