Carney sees positive long-term prospects for UK economy

More stimulus probably needed at some point: BoE’s Shafik

LONDON, Sept 28, (RTRS): Long-term prospects are positive for the UK economy and it is performing as the Bank of England had expected when it introduced stimulus measures in August to cushion the economic shock from the June Brexit vote, Governor Mark Carney said in an interview with Herald Scotland.

“We had expected in August that the economy would slow materially during the second half of this year, relative to relatively strong growth in the first half of this year. Broad brush, that is what we are seeing,” Carney said in the interview to be published in the newspaper on Wednesday.

“There are positive long-term prospects for the UK economy. It is a product of a period of uncertainty and adjustment that naturally is under way. It is a slowing from strong growth to something less than that,” he added.

Commenting on the impact on the economy from the heightened constitutional debate in Scotland in the wake of the Brexit vote, Carney said that people across regions and sectors are coming to terms with the potential changing nature of Britain’s relationship with Europe and the challenges that brings.

“That is the principal uncertainty people are addressing. It is still early days in that adjustment.”

Meanwhile, Bank of England Deputy Governor Minouche Shafik said she expected the central bank would need to pump more stimulus into Britain’s economy “at some point” as it adjusts to the shock of the vote to leave the European Union.

“There is no doubt in my mind that the UK is experiencing a sizeable economic shock in the wake of the referendum,” Shafik said in a speech she was due to make on Wednesday.

The BoE has previously signalled that it was likely to cut interest rates later this year although there have been signs that the British economy did not suffer as big a hit from the Brexit vote as the central bank had expected.

Shafik noted the possibility of reduced access for British companies to markets in the EU and said the uncertainty about the outcome of the “protracted process of withdrawing” from the bloc was weighing on prospects for business investment.”

The fall in the value of sterling since the referendum on June 23 was helping the economy which was flexible enough to cope with the change. But the process of adjustment would be painful, she said.

“That’s where monetary policy can help, and it seems likely to me that further monetary stimulus will be required at some point in order to help ensure that a slowdown in economic activity doesn’t turn into something more pernicious,” she said.