Carney blames Brexit for rising interest rates

FORMER Bank of England governor Mark Carney has blamed Brexit for Britain’s rising interest rates.

Mr Carney, who has been a vocal critic of the UK’S decision to leave the EU, said Brexit had devalued the pound, dented productivity and damaged the economy’s ability to grow. That has put upward pressure on inflation, forcing the Bank to raise rates even as the economy heads into recession.

“If I can cast your mind back to two years ago, this is what we said was going to happen,” Mr Carney, who left the Bank of England in 2020, told BBC Radio 4’s Today programme. “The exchange rate was going to go down, it would stay down, that would add to inflationary pressure, the economy capacity would go down for a period of time because of Brexit, that would add to inflationary pressure, and we would have a situation, which is the situation we have today, where the BOE has to raise interest rates despite the fact that the economy is going into recession.”

On Thursday the Bank raised interest rates by 75 basis points to 3pc – the biggest increase since Black Wednesday in 1992 – and warned that Britain faced its worst recession on record if rates continue to rise at the rate expected by the markets.

While the Bank is raising rates in the face of recession, it is not out of step with other central banks. On Wednesday, the US Federal Reserve raised interest rates by 0.75 percentage points, with chairman Jerome Powell dashing hopes of a slowdown in monetary policy tightening. That contrasts with Bank Governor Andrew Bailey, who sought to rein in market bets on continued sharp increases, warning the UK was facing its longest recession on record.

Mr Carney, who now holds a top role at Brookfield Asset Management and is co-chair of the Glasgow Financial Alliance for Net Zero, acknowledged that the war in Ukraine was driving up inflation globally and forcing central banks to act, but said Britain also had to deal with “the impact of Brexit, which has slowed the pace at which the economy can grow”.