Published: Sun, July 08, 2018
Finance | By Claude Patterson

Bank of England governor Mark Carney upbeat on United Kingdom growth

Bank of England governor Mark Carney upbeat on United Kingdom growth

Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Through reduced trade alone, the effect on the global economy would be around 1% of gross domestic product, he said.

Ahead of the match against Sweden, the Bank of England governor sported a Three Lions badge on his suit lapel at a business event in the northern city of Newcastle on Thursday.

But he warned: "There is a growing possibility that trade uncertainty could crystallise the longstanding risks of a snap back in long-term interest rates, increased risk aversion and a general tightening in global financial conditions".

President Donald Trump imposed tariffs on steel and aluminum imports from the European Union in May, as well as Canada and Mexico, citing national security concerns. He has been vociferous on Twitter in discussing those tariffs, frequently lamenting what he sees as the anti-US slant of global trade policy.

He warned a trade war could prove the catalyst for a wider economic slowdown. That's a belief echoed by Carney, who asked his audience, "What if rhetoric becomes reality?"

He said: "There are some, tentative signs that this more hostile and uncertain trading environment may be dampening activity".

The BoE in addition forecast that further escalation in the trade war, or ten-percentage point rise in tariffs between the USA and all of its trading partners could erase 2.5 per cent off U.S. output and one per cent off global economic output.

Not only would a significant trade war lower global growth, but it would also affect the nascent normalization of monetary policy developing around the world.

Rob Johnston, chief executive of Cumbria Chamber of Commerce, said: "It will be fascinating to hear his thinking on where the United Kingdom economy is going, the trajectory for interest rates and inflation, and his insight on Brexit given his experience as our most senior diplomat in Brussels". "Although the shock from higher tariffs would drag on activity, their initial impact would be inflationary, particular for the country at the center of the trade dispute".

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