Bank of England chief says United Kingdom to underperform until mid

Bank of England governor Mark Carney has told the International Monetary Fund (IMF) that United Kingdom interest rates are likely to rise soon, though the increase will be "gradual and limited". Implying that this could necessitate interest rate rises to rein back some of the extraordinary monetary stimulus introduced in the last decade, Carney said "a static monetary policy stance becomes more expansionary all else equal".

The changes wrought by Brexit will be a crucial variable for the Bank's monetary policy, he said.

The Governor said Brexit was likely to push up inflation in the short term as fewer workers from overseas came to the United Kingdom, making it more hard for employers to recruit and so pushing up wages. He backed up last week's BoE warning on rising United Kingdom interest rates by highlighting diminishing spare capacity in the economy despite continued low growth and continued weak income growth.

Figures released last week by the Office for National Statistics (ONS) showed Britain's unemployment rate hit a new low in the quarter to July 2017, while wages increased less than expected as they continue to lag behind inflation.

On balance, he said inflation remains likely to overshoot the Bank's 2 per cent target over the next three years, forcing the MPC's hand.

Carney warned and added that there remains "considerable risks" to the outlook for the United Kingdom economy. The pound was down 0.7% against the common currency at €1.129.

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Carney said last week: "A withdrawal of part of the stimulus that the committee had injected in August a year ago would help to moderate the inflation overshoot while leaving monetary policy very supportive".

This will increase pressure on the Bank of England to lift interest rates from record lows.

"UK economic growth has unquestionably slowed from the rates seen throughout much of 2016", Nina Skero of CEBR said.

"Brexit-related uncertainties are causing some companies to delay decisions about building capacity and entering new markets", Carney said.

"Governor Mark Carney's speech at the International Monetary Fund (IMF) maintained the view that the Bank of England (BoE) is paving the way for a hike in interest rates sooner rather than later with a move in November a very real possibility".

"Any reduction in openness with the European Union is unlikely to be immediately compensated by new ties of a similar magnitude with other trade partners", the BOE governor said.

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