The Press and Journal (Inverness, Highlands, and Islands)
Brexit putting brake on growth – Carney
Outlook still bright, says governor
The long-term outlook for theUKeconomy is positive, according to the governor of the Bank of England, but he said growth was slowing in the wake of the Brexit vote.
Mark Carney also warned that Scotland’s North Sea oil sector may have to deal with challenging conditions “for some time”.
In a low-key visit to Scotland, Mr Carney also highlighted the impact ofNorth Seaweaknessonthe broader Scottish economy, describing the downturn as having a “multiplier impact”.
Across the UK, he said, Britain was transitioning from “strong growth to something less than that”, while individuals and businesses across the nation were grappling with heightened uncertainty posed by the UK’s changing relationship with Europe.
“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,” MrCarney said. “Broad-brush, that is what we are seeing.
“That is not a comment on the long-term prospects for the UK economy,” he added. “There are positive long-term prospects for the UK economy.”
Following Mr Carney’s remarks, Minouche Shafik, the Bank’s deputy governor, said further economic stimulus is likely to be needed as the UK faces up to a “sizeable economic shock” because of Brexit.
A key member of the Bank of England’s monetary policy committee (MPC), Ms Shafik said uncertainty surrounding Brexit negotiations is weighing on investment. “There is no doubt in my mind that the UK is expein riencing a sizeable economic shock in the wake of the referendum,” she said, noting that any reduction economic “openness” is expected to hit growth.
“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.”
Her comments come after the Bank delivered a stimulus package in response to the Brexit vote in August, which included a cut to the key interest rate to record lows of 0.25%, and extending the quantitative easing ( QE) programme.
Ms Shafik said thetiming of fresh stimulus “will depend on the continued evolution of the data over the coming weeks and months”.
However, Ms Shafik noted there has been a “welcome improvement in forward- looking indicators” which suggest that the economic slowdown might not be as bad as originally feared.
“It seems likely further monetary stimulus will be required at some point”