Trade wars and uncertainty mean we are ready for global slump, warns Mark Carney
A global slowdown is increasingly likely as trade wars and uncertainty over the future take their toll, Mark Carney has warned.
The Bank of England Governor said that risks of an economic downturn have ‘gone up’, but the authorities have the power to cope if the situation worsens.
Speaking in New York, Carney said: ‘Do we have the tools? Yes, we have the tools.’
Bank of England Governor Mark Carney said that risks of an economic downturn have ‘gone up’, but the authorities have the power to cope if the situation worsens
Interest rates remain close to record lows a decade on from the financial crisis, making it more difficult to support the economy by cutting them further if a downturn does strike.
This means central banks are more likely to resort to unorthodox methods to shore up the economy, for example by restarting the money-printing schemes which helped stave off collapse during the last recession.
Governments will need to support banks’ efforts with extra spending and tax cuts to shore up growth, Carney suggested.
He added that the core of the British financial system is ready for Brexit and will continue functioning whatever happens, even if we leave the European Union without a deal.
Carney also said that turmoil over Brexit means the pound is now behaving as if it is money used by a nation in the developing world.
These emerging market currencies are notoriously prone to wild swings, while heavily traded sterling normally is much less volatile.