Bank of England's Carney sees UK 're-coupling' with global economy

The pound shot up on Friday morning as Bank of England governor Mark Carney said he could see a "conscious re-coupling" between the UK and the booming world economy and defended his gloomy Brexit predictions.

Carney, speaking on BBC radio on Friday morning, defended his previous caution on the effects of Brexit, which had seen the bank subsequently have to upgrade some of its most gloomy forecasts, pointing to the UK being "a bit of an outlier” in underperforming the booming global economy due to a “Brexit effect in the short term” as companies were uncertain about the future.

After the Brexit referendum in 2016, the UK grew more slowly than every other G7 country over the first three quarters of 2017, with the fourth quarter's gross domestic product figures to be released later on Friday.

The BoE boss said he and his colleagues were correct in forecasting that the Brexit vote would lead to lower growth for the UK economy, a fall in the pound and higher inflation, all of which had happened, though the economy has not performed quite as badly as the Bank and many other economists predicted.

Carney said the BoE did now "see some potential for a bit of a pick-up".

By the end of 2018, he said UK economy "is expected to be about two percentage points below what had been expected before the referendum,” he said, stressed this was a “short term” effect.

Sterling spiked on Friday morning, and by 0745 GMT was up 0.7% against the dollar at 1.4261, notching up highs not seen since before the Brexit referendum. The pound was up 0.1% versus the euro at 1.1420.

Carney, who along with the European Central Bank’s bond-buying chief Benoit Coeure and Bank of Japan governor Haruhiko Kuroda, will be addressing the World Economic Forum later on Friday, said: "There is the prospect this year, as there is greater clarity about the relationship with Europe and subsequently with the rest of the word, for a recoupling – if I can use that term borrowed from Gwyneth Paltrow - a conscious recoupling of the UK economy with the global economy.”

TECHNICAL HITCH

Overnight, the Bank was unable to process a some transactions for wholesale counterparties, it said in a statement on Thursday evening, after suffering technology problems.

“Following a regular internal IT update, the Bank is experiencing intermittent technology communication problems that are indirectly affecting our ability to process a limited number of transactions for wholesale counterparties by the usual means," the bank said.

"We have implemented workarounds to enable the Bank to operate as normal, including completing wholesale transactions in as timely a way as possible. We are working to resolve the underlying issue as quickly as we can."

The technology issue was not affecting the real-time gross settlement service or the CHAPS payment system, so the general public were not expected to see any impact on any of their banking services.

On Friday morning, the bank said the technology problems had been fixed, although there was some "catch-up work" to complete.

"We expect to be able to process business as normal today but in order to catch up from yesterday, wholesale counterparty transactions may be dealt with somewhat later in the day than usual."