The U.K. economy is currently experiencing a period of uncertainty and adjustment following the Britons’ surprise vote in June to leave the European Union, but the longer term prospects are positive, Bank of England Governor Mark Carney said in an interview published Wednesday.
“As all of the MPC said in our most recent decision in September, the broad contours of how the economy is performing [are] in line with what we had expected in August,” Carney said in the interview to the Herald Scotland newspaper.
“We had expected in August that the economy would slow materially during the second half of this year, relative to relatively strong growth in the first half of this year. Broad brush, that is what we are seeing.”
In the September policy session, a majority of BoE policymakers signaled that they would support a further cut in the key interest rate in November, if the economy evolved in line with the projections made in August.
Pointing out the softening in business investment and the real estate market, Carney said such “big lumpy decisions” were being affected by the “Brexit” uncertainty. Meanwhile, consumer spending is holding up and the housing market is giving mixed signals, he added.
“There are positive long-term prospects for the UK economy,” Carney told the Scottish daily.
“It is a product of a period of uncertainty and adjustment that naturally is under way. It is a slowing from strong growth to something less than that.”
In a bid to cushion any adverse impact from “Brexit”, BoE policymakers had lowered the key rate by a quarter-point in August, which was the first cut in more than seven years. The bank also boosted its asset purchase programme by GBP 60 billion.
Scotland had largely voted to ‘remain’ in the EU in the June 23 referendum. The “Brexit” vote has triggered calls for a second Scottish independence referendum.
Regarding the economic impact of the heightened constitutional debate in Scotland in the aftermath of the “Brexit” vote, Carney said, “At this stage, there is a common issue across the regions, across home nations, across sectors of the economy, where individuals and businesses are coming to terms with the potential changing nature of the relationship with Europe and the changes and challenges that brings.”
“That is the principal uncertainty people are addressing. It is still early days in that adjustment,” he added.
Businesses are prudently examining their options in the light of the potential future relationship between the U.K. and the EU, and this is slowing the economy, Carney pointed out.