Carney and IMF eat more humble pie as economy keeps on booming
HOUSEHOLDS have defied doom-mongers by continuing to splash out after the Brexit vote, the governor of the Bank of England said last night. Mark Carney, who has been accused of taking part in the Project Fear campaign against Brexit, admitted the economy has fared better than expected.
Figures from the IMF, which had warned against leaving the EU, yesterday showed Britain was the fastest growing major economy in the developed world last year.
The global watchdog said the UK’s 2 per cent growth in 201 outpaced the other Group of Seven leading industrialised nations – the United States, Japan, Canada, Germany, France and Italy.
The IMF said it now expects Britain’s economy to grow by 1.5 per cent this year. It forecast 1.1 per cent in October. ‘Domestic demand held up better than expected in the aftermath of the Brexit vote,’ the Fund said.
IMF chief Christine Lagarde had warned Britain’s prospects following a Leave vote would be ‘pretty bad to very, very bad’.
Mr Carney put the strength of the UK economy down to British consumers – add- ing that the ‘flexibility and dynamism’ stood the country in good stead for the future as ‘new opportunities with the rest of the world open up’.
‘Households appear to be entirely looking through Brexit-related uncertainties,’ he said in a speech at the London School of Eco- nomics. The comments marked yet another U-turn from the Bank and its Governor, who before the referendum warned a vote to leave the EU could trigger a recession.
He said the economy was ‘increasingly consumption-led’ and warned rising prices could dampen spending this year.
Last August the Bank slashed its growth forecasts for 2017 to 0.8 per cent, having cut interest rates to a new low of 0.25 per cent. But in November it was forced to admit the outlook was far brighter – and it raised its prediction for this year to 1.4 per cent.
Mr Carney last week hinted that a further upgrade could follow next month as he conceded ‘the immediate risks around Brexit have gone down for the UK’.
Speaking last night, he added: ‘Over the autumn, demand growth remained more resilient than had been expected, particularly consumer spending and to a lesser extent the housing market.’
He noted that the financial markets had been ‘less sanguine’ – and pointed to the fall in the pound since the Brexit vote.
‘Ultimately, the tension between consumer strength on the one hand and the more pessimistic expectations of markets on the other will be resolved,’ he said.