On Sunday, Mark Carney, the Bank of England Governor, said that in the short term, the economy of Britain will grow more slowly if the country fails to arrive at a future trading deal with the European Union after Brexit.
When asked during an interview with the ITV television if the economy of Britain would take a hit in the absence of a Brexit deal. Carney stated:
“In the short term, without question, if we have materially less access (to the EU’s single market) than we have now, this economy is going to need to reorient and during that period of time it will weigh on growth.”
Mark Carney also said that British business investment should now be booming, given the strength of the economy of the world and other factors. However, he said that it was just growing instead.
This is due to the uncertainty regarding the results of the Brexit negotiations, Carney said.
On Thursday, the Bank of England increased interest rates for the first time since 2007, before the commencement of the global financial crisis. However, sterling dropped sharply as the central bank also said that it expected only “very gradual” rate increases ahead.
The economy of Britain has slowed sharply in 2017 following the Brexit vote last year. However, the Bank of England decided to increase rates in part since it believes that Brexit will cause more inflation pressure because of weaker investment and lower migration.
On Sunday, Carney informed ITV that it was likely that in the event of a bad Brexit deal, the Bank of England would not be able to lower interest rates in the future due to that inflationary pressure.
“The scenario you paint is not the most likely, by any stretch of the imagination, but it is a possibility,” said Carney.
The BoE governor has come under political pressure from various supporters regarding the vote to leave the European. The supporters have been outraged by his comments that Brexit is producing a negative impact on the economy.