Exclusive: Bank of England Governor backs ‘bedrock’ open economy

The Governor of the Bank of England has praised the openness of Britain to global trade, investment and skilled foreign workers and students, describing it as the “bedrock of this economy”.

Mark Carney, govenor of the Bank of England, visits Nuclear AMRC at Catcliffe, Rotherham. Picture: Scott Merrylees

Speaking during a visit to Yorkshire, Mark Carney said the UK’s open economy is “widely and rightly admired around the world” and reinforcing the trends would benefit the nation.

The central banker visited the Advanced Manufacturing Research Centre in Rotherham and met with business leaders and apprentices.

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He told them: “Openness is a good thing. Historically this has been the strength of the UK.

Mark Carney with apprentices at the AMRC

“As a Canadian I have very much admired the openness of this economy, right down to the openness to have someone like me standing here, as the Governor of your central bank.”

In an interview with The Yorkshire Post, Mr Carney said the Sheffield University facility was a testament to Britain’s openness with its international backers and foreign talent.

But Mr Carney also voiced concerns that the open UK economy could import low inflation from overseas.

Sharp falls in oil prices, a struggling eurozone and a rebalancing of China’s economy are blamed for low global inflation.

Low inflation hits indebted households and businesses as mortgages and loans are denominated in cash terms and falling prices lead to an increase in the real value of their debts.

In the UK, inflation hit 0.3 per cent in January, well below the central bank’s two per cent target.

Mr Carney said inflation expectations in the UK are “well anchored” and “we see domestic demand growth picking up (and) we see wages starting to pick up as well”.

He added: “We see all the characteristics of building that domestic inflation that we need to sustain and get back to our two per cent target.

“The one concern… is that it is possible that we will have a protracted persistent period of low inflation globally, that we import that, particularly if the currency is stronger than it has been.”

Mr Carney would not give any clues on when the Bank’s Monetary Policy Committee might start to increase interest rates, at a historic low since 2009.

He said: “I think and the MPC thinks a gently rising path of interest rates is consistent with inflation returning sustainably to target.

“Today’s not the day, but we are on track in terms of domestic developments; we have to be mindful of external risks and we will take that decision as a committee when appropriate.”

Mr Carney said Yorkshire’s economy has made “steady progress” over the last 18 months. He said unemployment has come down, although it remains above the national average, and business investment intentions have picked up.

Mr Carney said the UK faces challenges from weak demand in Europe and the strength of sterling, which reinforces the importance of places like the AMRC in building longer-term competitiveness.

- The Bank of England is represented in Yorkshire by agent Juliette Healey from the Bank of England Agency for Yorkshire & Humber.