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Now is not the time for an interest rate hike - Mark Carney

Bank of England Governor Mark Carney has said that now is not the time for an interest rate hike, while wages continue to stagnate and the impact of Brexit on the economy is unclear.

Speaking after three Bank policymakers called for a rate rise amid warnings that Brexit-fuelled inflation is set to surge further over the summer, Mr Carney said "now is not yet the time to begin that adjustment".

Delivering his delayed Mansion House speech, Mr Carney said: "Different members of the Monetary Policy Committee will understandably have different views about the outlook and therefore on the potential timing of any Bank rate increase.

"From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment."

The Canadian said he would like to see if falling consumer confidence is offset by other components of demand, whether wages begin to "firm", how the economy reacts to "tighter financial conditions", as well as the reality of Brexit negotiations, before considering any rate hike.

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.

It came after inflation hit 2.9% in May - its highest level in nearly four years and far higher than expected.

The pound sank on the news, falling 0.4% 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.

"Since the prospect of Brexit emerged, financial markets, notably sterling, have marked down the UK's economic prospects.

"Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU.

"But it can influence how this hit to incomes is distributed between job losses and price rises."

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.

The Governor also waded into the row over euro-clearing after the EU released proposals which could force operators to leave London as a result of Brexit, putting the capital's multibillion pound industry at risk.

"The UK houses some of the world's largest CCPs (central counterparty clearing houses).

"Fragmentation of such global markets by jurisdiction or currency would reduce the benefits of central clearing," he said, while adding that "fragmentation is in no-one's economic interest".

He also added his voice to concerns that wrenching clearing from London would result in higher costs, which would "ultimately be passed on to European households and businesses".

However, the governor welcomed parts of the proposals that would see co-operation arrangements between the EU authorities and their overseas counterparts, including potential provisions for deference to the rules to which a clearing house is subject in its home jurisdiction.

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