Governor of the Bank of England Mark Carney said “now is not yet the time” to tighten monetary policy in his Mansion House speech today, driving down sterling to under $1.27 – a one-week low.
Carney’s comments follow last week’s monetary policy committee meeting where three members voted to raise interest rates, the most hawkish stance the eight-strong committee has taken since 2011.
In today’s speech – which was postponed due to the Grenfell tower fire – Carney cited fluctuating consumer spending and business investment, weak domestic inflationary pressures and anaemic wage growth as reasons to refrain from reducing the stimulus measures.
Indications of stronger trade or a rebound in investment to counter low household spending and rising wages should be apparent before policy is changed, Carney said, adding that he would first like to see “how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations”.
“Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption,” he said.
Carney added that London should remain a hub for global derivatives trading following the recent publication of the European Commission’s plans to force UK-based clearing houses to abide by EU regulations.
“Fragmentation is in no one’s economic interest. Nor is it necessary for financial stability,” he said, adding that he recognised European concerns, having faced them himself at the Bank of Canada, but they were addressed through “common standards and cooperative oversight.”