Bank of England warns Brexit will have 'major implications' on UK economy as interest rates rise for first time in a decade

Warning: Bank of England governor Mark Carney
Stefan Rousseau/AFP/Getty Images
Fiona Simpson2 November 2017

Bank of England chief Mark Carney has warned uncertainty over Brexit was to blame for the UK's first interest rate rise in a decade.

The bank’s key lending rate today doubled from an all-time record low of 0.25 per cent to 0.5 per cent after the key Monetary Policy Committee (MPC) voted 7 to 2 for a hike.

Governor Mr Carney said following the rise that the UK’s decision to leave the European Union is having a “noticeable impact on the UK’s economic outlook.”

He said: “These are not normal times. Brexit will redefine the UK's relationship with our largest trade and investment partner."

Mr Carney noted that the decision to leave the EU has already weakened the pound, raised inflation, and created uncertainty that has weighed on business sentiment.

"The decision to leave the European Union is already having a noticeable impact," he said.

"The overshoot of inflation throughout the forecast predominantly reflects the effects on import prices of the referendum-related fall in sterling.

"Uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly.

"And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been evident in recent years in the rate at which the economy can grow without generating inflationary pressures," Mr Carney added.

Mr Carney said the "worst" of the income squeeze hitting British households is ending.

In justifying the rate rise, he said: "This is part of ensuring that it (the income squeeze) doesn't come back and ensuring that inflation comes back to the 2 per cent target in a sustainable manner."

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