Mark Carney: we expects smooth Brexit and wage squeeze to pass

Bank of England (BoE) governor Mark Carney insisted Thursday that the British monetary authority continues to assume a “smooth transition” as the UK undertakes the process of its departure from the European Union (EU), known as Brexit, and insisted that the current issue of wages increasing at a lower rate than prices would pass at the turn of the year.

In line with market expectations, the BoE kept the benchmark interest rate at a record low of 0.25% and left its asset purchase program unchanged at £435 billion earlier on Thursday.

Also as expected, the decision to maintain interest rates was undertaken in a vote with six members of the BoE’s Monetary Policy Committee (MPC) in favor while members Michael Saunders and Ian McCafferty dissented, repeating their previous call for a 25 basis-point increase.

BoE expects smooth Brexit transition
Carney began the posterior press conference by stating that the UK was beginning to adjust to a “new and uncertain” relationship with the EU.

He admitted that the BoE could not prevent weaker real incomes for the British people but could work to influence the playoff between job losses and increases in prices. Carney stated that the uncertainty surrounding Brexit would weigh on growth as some companies were delaying decisions about investment and entering new markets.

He further indicated that the process was beginning to affect the British economy’s supply capacity.
Despite these negative effects, Carney insisted that both the UK and EU were working to avoid a disruptive process that would not be in either’s interest which is why the BoE was using a “smooth Brexit” as its base case scenario.

With regard to monetary policy, the MPC indicated in the minutes that it now expects two rate increases over the forecast horizon, compared to its prior estimate of just one.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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