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UK will be hit with higher inflation if there is no Brexit transition, Carney warns

Britain could suffer even higher inflation and weaker growth if Brexit negotiators fail to agree a transitional deal with the European Union, Mark Carney has warned.
An abrupt exit might result in a further fall in the value of the pound down, dent business investment and shut off trade routes, squeezing the UK economy and leading to higher prices and higher interest rates.
The Governor of the Bank of England said a transitional deal would help companies and households to adjust. He said he would "cast my vote" for such an agreement.
“On the moment of Brexit, it will very much depend on what the final arrangement is with the EU 27 and what the transition path is from here to there,” he told the European Central Bank’s communications conference.
[img]http://17909.cdx.c.ooyala.com/xqZ3k4ZDE6mkp1ayNuiYcXktcvZ6r1Hp/promo333898791" alt="Bank of England Governor Mark Carney explains interest rate rise"/>
Bank of England Governor Mark Carney explains interest rate rise
02:17
There have already been some fallout from Brexit - both in terms of investment and value of the pound - because businesses and markets remain uncertain about he final shape any deal. Mr Carney said such developments should be watched closely.
“You could see a balance where [the effects on supply and demand] are inflationary and there not being that much spare capacity in the economy because capacity has been taken out,” he said.
“You could also see a mix of effects where there is quite an expansive relationship with Europe, a reasonable transition horizon, not much spare capacity is taken out, the exchange rate and other asset prices rally, demand holds up, but relative to supply it is disinflationary.
“You could paint either picture. So what we’re trying to get across is that the balance of these, so people can adjust as the negotiations proceed.”
The Bank of England will do everything it can to keep the economy growing and the financial system stable through Brexit, Mark Carney has pledged.
“What are we trying to say to the people of UK[/img]

UK will be hit with higher inflation if there is no Brexit transition, Carney warns

CBI to Government: Brexit clock is ticking
02:01
“During these exceptional circumstances we will stretch out horizon over which we return inflation to target from above. Normally you would say 18 to 24 months, we will stretch that out to three years, in order to support the economy during the adjustment process,” he told .
“We have a trade off which is there. There are limits to the extent to which we are prepared to do that, and as a Committee we reached those limits a few weeks ago which is why we adjusted interest rates.”
Meanwhile Mario Draghi from the ECB and Janet Yellen, chair of the US Federal Reserve, said they intend to guide markets away from quantitative easing and towards tighter monetary policy through regular clear updates.
Forward guidance itself is now “a fully-fledged monetary policy instrument,” Mr Draghi said, speaking on the same panel as Mr Carney.
Ms Yellen added that all guidance on future policy changes must still be contingent on economic developments, indicating that markets, households and businesses should watch what the Fed says about the data.
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