NEWS Release - Uncertainty, the economy and policy Speech given by Mark Carney, Governor of the Bank of England Court Room, Bank of England 30 June 2016
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Today I want to discuss what uncertainty means for the UK’s economic performance, and how the Bank of England can best respond to it. The result of the referendum is clear. Its full implications for the economy are not.
The UK can handle change. It has one of the most flexible economies in the world and benefits from a deep reservoir of human capital, world-class infrastructure and the rule of law. Its people are admired the world over for their strength under adversity. The question is not whether the UK will adjust but rather how quickly and how well. Nonetheless, the decision to leave the European Union marks a major regime shift. In the coming years, the UK will redefine its openness to the movement of goods, services, people and capital. In tandem, a potentially broad range of regulations might change. Uncertainty over the pace, breadth and scale of these changes could weigh on our economic prospects for some time.
While some of the necessary adjustments may prove difficult and many will take time, the transition from the initial shock to the restructuring and then building of the UK economy will be much easier because of our solid policy frameworks. At times of great uncertainty, households, businesses and investors ask basic economic questions. Will inflation remain under control? Will the financial system do its job? Will I keep mine? Such issues are why monetary and financial stability are fundamental pre-requisites for effective economic adjustment and sustained prosperity. Discharging the Bank’s responsibilities for these public goods demands rigorous analysis, objective judgement, and effective transparency. We will not shirk from these obligations.
The Bank and its independent policy committees will continue to provide analytically based, clear-eyed assessments of the economic and financial outlooks. And we will outline the risks to these forecasts so that we and others can prepare to manage them. The near-term challenges facing the UK economy can’t be wished away. But they can be addressed. A clear plan is needed, and its measures must be implemented with resolute determination.
After briefly reviewing the relationship between uncertainty and the economy, I want to review how the Bank of England’s contribution to that plan will unfold over the coming weeks. But at the outset, I want to re-emphasise that the Bank has taken all the necessary steps to prepare for these events. And we will not hesitate to take any additional measures required to meet our responsibilities as the United Kingdom moves forward.
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