Economia

Pound drops on Carney rate comments

Pound drops on Carney rate comments

During his Mansion House speech this morning, Carney cited mixed signals on consumer spending and business investment as well as "anaemic wage growth" as his reasons for holding off on a rate rise.

"In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to. the reality of Brexit negotiations".

The pound sank on the news, falling 0.4 per cent against the dollar and euro to 1.26 and 1.13 respectively.

On Brexit, the governor said Britain's divorce from the block is set to result in "weaker real income growth", job losses and price rises, but added that monetary policy has limited power to prevent economic weakness.

The country will soon "begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption", Mr Carney added.

'Any development which prevented EU27 firms from continuing to clear trades in the United Kingdom would split liquidity between a less liquid onshore market for European Union firms and a more liquid offshore market for everyone else'.

"Any development which prevented EU27 firms from continuing to clear trades in the United Kingdom would split liquidity between a less-liquid onshore market for EU firms and a more-liquid offshore market for everyone else", he said, explaining such a scenario would expose firms to capital charges 10 times as high as they face today - with the costs passed on to European households and businesses.

His comments come after the head of a Frankfurt lobby group said euro-clearing businesses are already moving accounts to the German city as a result of Brexit.

Central bank governor Mark Carney made the announcement alongside finance minister Philip Hammond in London during a speech which had been delayed because of the Grenfell Tower fire tragedy.

Last week the MPC kept interest rates on hold at 0.25%, but Ian McCafferty, Michael Saunders and Kristin Forbes all voted for a rise to 0.5%, marking the first time three members have dissented for more than six years.

Sterling's weakness been a factor in consumer price inflation reaching its highest in almost four years, contributing to a slowdown in consumer spending and lacklustre first-quarter growth.