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No-deal Brexit may force interest rate rise, says Bank of England governor Mark Carney (The Independent)

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The governor suggested that, unlike after the referendum vote, rates may need to rise to curb inflation.

Mark Carney, the governor of the Bank of England, has suggested that interest rates may need to rise, rather than fall, in the event of a no-deal Brexit.

In a speech in Ireland, he said Brexit is the “most significant” influence on the UK’s economic outlook and that the Bank’s job is to “plan for the worst”.

He added: “The appropriate [monetary] policy response is not automatic and will depend on the balance of the effects on demand, supply and the exchange rate”.

The governor had previously seemed to suggest that a no-deal Brexit could result in a rate cut to support the economy by making borrowing cheaper, as occurred after the Brexit referendum in 2016.

But according to reports of a briefing that Mr Carney gave to the cabinet on Thursday, he fears that such a rupture with the EU could represent a severe “contraction of supply” capacity in the UK economy. This could mean that inflation would be in danger of getting out of hand without early rate rises, particularly if sterling plummeted again, pushing up domestic import prices.

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