Carney Warns EU Against Splitting Euro Clearing Market

Britain's Prime Minister Theresa May and her husband Phillip arrive at a church in Sonning Britain

Britain's Prime Minister Theresa May and her husband Phillip arrive at a church in Sonning Britain

Mark Carney is still anxious about the impact of Brexit on the economy and signaled he won't be rushing to raise interest rates anytime soon.

Mr Carney's speech was postponed last week because of the devastating fire in Grenfell Tower. Carney said weak wage growth raised questions about the strength of domestic inflationary pressures, and he was unsure how the economy would respond to talks between the United Kingdom government and the rest of European Union on the terms of their separation.

In his first major comments in six weeks, the Bank of England governor addressed weaknesses in the economy, saying that domestic inflation pressures remain subdued and wage growth is anemic. He added that this includes a Brexit that "works for all".

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

Over the coming months, Carney wanted to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm and how the economy reacts to tighter financial conditions.

Sterling dropped against the dollar and was at $1.2673 as of 8:39 a.m. London time, down 0.5 percent on the day. The BOE has said it would favor a smooth transition to its new relationship, avoiding a so-called cliff edge.

Speaking to London's banking community alongside finance minister Philip Hammond a day after Brexit talks started, Carney cited weak wage growth, mixed signals on consumer spending and business investment as reasons for not moving to raise interest rates any time soon.

Carney said in a global economy marked by a clear divide between surplus and deficit countries, the UK's current account was deeply in the red.

In the text of a speech that was due to be delivered last week at the annual Mansion House dinner, but was delayed as a mark of respect to the victims of the Grenfell Tower fire in West London, Carney also said that Britain's European Union exit negotiations would signal "the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption".