UK economic outlook promising says Bank of England Governor Mark Carney

The UK economic outlook is now much more promising, says Mark Carney, Governor of the Bank of England. The Bank of England is the United Kingdom’s central bank.

During a speech at the Northern Powerhouse Summit in Newcastle, Mr. Carney said he had considerably more confidence in the British economy. His speech triggered expectations of an interest rate hike next month, i.e., in August 2018.

UK economic outlook – the weather

The UK economic outlook during the first quarter was weak. However, this was mainly due to the weaker, Mr. Carney believes.

Since then, consumer and household spending have increased significantly. Not only have they increased but they have also ‘bounced back strongly.’

UK Economic Outlook - Marc Carney comments
With a more promising UK economic outlook, expectations of a bank rate hike next month have grown. (Image adapted from ‘Great Exhibition of the North.’)

UK economic outlook – World Cup

Winning the 2018 FIFA World Cup would be marvelous for the British economy. In fact, Mr. Carney said it would be an “unalloyed, unadulterated absolute good.”

Mr. Carney said:

“Overall, recent domestic data suggest the economy is evolving largely in line with the May Inflation Report projections, which see demand growing at rates slightly above those of supply and domestic cost pressures building.”

Pound strengthened

Following the Governor’s remarks, the pound sterling edged up 0.2% against the US dollar to $1.3254.

In June, Andy Haldane, the Bank of England’s Chief Economist, voted in favor of raising the interest rate to 0.75%.

Two other members of the Bank of England’s Monetary Policy Committee also voted in favor of raising the interest rate.

The ‘interest rate‘ is the rate at which the central bank lends money to domestic financial institutions. A commercial bank, for example, is a financial institution. We also refer to the interest rate as the ‘base rate.’ Americans call it the ‘federal discount rate.’

Monetary Policy Committee

According to the Bank of England, the Monetary Policy Committee or MPC consists of nine members. Members include the Governor, and Deputy Governors for Monetary Policy, Financial Stability, Markets, and Banking.

There are also four external members who the Chancellor of the Exchequer appoints directly.

Six MPC members, including Mr. Carney, voted to keep rates as they were at 0.5%.

Trade war could dampen growth

Mr. Carney also warned that the looming trade war could undermine GDP growth.

GDP stands for Gross Domestic Product. Everything a country produces in a given period, for example, one year, is its GDP.