Bank of England chief downplays chance of interest rate hike

Brexit Briefing GBP Indecision as Divorce Talks Start in Brussels

In the speech, Carney said "mixed signals" from spending and business investment as well as subdued inflationary pressures and "anaemic wage growth" meant now was not the time to adjust rates.

The dovish comment from Carney sent the pound lower.

Carney admitted that since the Brexit vote the UK's economic prospects have dwindled but said that monetary policy "cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU".

The governor spoke at the annual Mansion House event which was rescheduled as a breakfast this morning, following its cancellation because of the Grenfell Tower fire tragedy last week.

'He [Hammond] proposed arrangements for a transitionary period during the Brexit process and beyond which would see the customs union rules remain in place for the United Kingdom until new rules are implemented and other measures agreed that would protect the city and prevent disruption, ' Davdra said.

The phrase is a clear challenge to a now infamous comment from Foreign Secretary Boris Johnson, who said previous year in reference to the government's ambition for a post-Brexit relationship: "My policy on cake is pro having it and pro eating it".

Oil was the one weak spot, with the price languishing at close to a seven month low on worries over a continuing supply glut.

Short sterling interest rate futures also rose strongly, especially for the late 2018 and early 2019 contracts, as the market priced in a shallower path of interest rate hikes in future years.

But as spare capacity in the economy erodes, he said the MPC's tolerance for above-target inflation was falling.

For three policymakers that justified undoing last year's rate cut, but Carney made clear he was in no rush to join them.

A new policy maker, economics professor Silvana Tenreyro, is set to be on the rate-setting board starting next month, the bank said Monday. "That "on hold" view is strengthened knowing that the governor is minded to act cautiously", said Investec economist Victoria Clarke.

The Chancellor also signalled the United Kingdom would seek to maintain the "frictionless" border arrangements of the European Union's customs union for an "implementation period" after leaving the bloc.

Brexit discussions with the European Union started on a low key note, but talk of a softer departure for the United Kingdom and repeated hints from the new and very confident French President Emmanuel Macron that the European Union door is still open for the United Kingdom have eased some concerns over the outcome. "But ensuring that it happens via a smooth pathway. one that protects jobs, prosperity, and living standards in Britain will require every ounce of skill and diplomacy", he said on Tuesday.

Bank of England Governor, Mark Carney, delivers a speech to the Bankers and Merchants at The Mansion House in London, Britain June 20, 2017.

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