Mark Carney has hit out at the current “hostile” environment for world trade, in a thinly veiled attack on Donald Trump.
The governor of the Bank of England told an audience in Newcastle there were signs of damage to global economic activity as the US president targets trade imbalances – with China, the world’s second-largest economy, now firmly in his sights after tit-for-tat measures against the EU, Canada and Mexico.
With less than 24 hours before the US is expected to impose tariffs on over $30bn (£22.6bn) of Chinese goods, Mr Carney said much of the disruption had, so far, been the result of “talk (and tweets)”.
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.”
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In wide-ranging remarks he also gave a further hint that the Bank’s monetary policy committee (MPC) was on track to raise interest rates, as markets expect, in August.
The governor said the economy was currently performing in line with forecasts after a temporary slowdown at the beginning of the year which was largely caused by bad weather.
Mr Carney – a Canadian – was also clearly supporting England’s bid to win the World Cup for the first time since 1966.
Spotted wearing a Three Lions lapel pin, he responded to a question on the economic impact of a potential England victory in the 15 July final by saying it would be an “unalloyed, unadulterated, absolute good”.
His speech was, however, focused on trade and he argued that central banks did not have the power to offset the effects of an all-out trade war – unlike after the UK’s vote to leave the EU.
“In a general trade war, it is unlikely that global financial conditions would prove as robust, or that monetary policy could be as supportive.”
He told the audience: “The hit to global and UK GDP (gross domestic product) would be substantially greater if everyone put up tariffs against everyone else.”
The pound lifted slightly against the dollar to $1.3250 on the governor’s remarks concerning the UK economy.
Dr Howard Archer, chief economic adviser to the EY ITEM Club, commented: “Very notable Carney says he is more confident that economy’s Q1 weakness was largely weather-related & he goes on to say economy largely evolving as forecast in May Quarterly Inflation Report.
“Fuels my belief BoE most likely to raise rates from 0.50% to 0.75% at Aug MPC meeting.”