The Bank of England is likely to raise interest rates in the “coming months” to dampen down inflation, Bank of England Governor Mark Carney has signalled.
Speaking at the International Monetary Fund’s headquarters in Washington yesterday, he reaffirmed that any rate rise would be at a gradual pace.
Carney said: “If the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then, with the further lessening in the trade-off that would imply, some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target.”
He added: “Any prospective increases in Bank Rate would be expected to be at a gradual pace and to a limited extent, and to be consistent with monetary policy continuing to provide substantial support to the economy.”
He also talked about Brexit, which he said would cause inflation to rise and have a worsening effect the longer it takes to secure new trade deals.
Carney said: “On balance, the de-integration effects of Brexit can be expected… to be inflationary.”
He added: “The reduction and reorientation of trade is likely to weigh on productivity for some time through a loss of comparative advantage and the disruption of supply chains.”