LONDON (Reuters) - Bank of England Governor Mark Carney gave a news conference on Thursday after the central bank kept interest rates at a record low and trimmed its forecasts for growth in 2017 and 2018 as the impact of Brexit weighed on households' spending power.
Below is a selection of his comments.
ON THE SQUEEZE ON CONSUMERS
"We think we are in the teeth of this right now so over the course of the next quarters, it will continue to feel like this but as we move into the new year, we'll see the inflation start to come down and household income start to go up."
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ON BREXIT UNCERTAINTIES
"It is evident that uncertainties about the eventual relationship are weighing on the decisions of some business. We see it directly in the macro-economic numbers, investment has been weaker than we otherwise would have expected."
ON LOSING ACCESS TO THE SINGLE MARKET
"Relative to the current arrangements, in the medium term, any agreement that - and if I isolate it to just the agreement - that reduces access to aspects of our largest trading partner, is likely to reduce the level of economic activity in this country.
"The bigger question of course is what else comes alongside that: what other agreements might be struck with other trading partners; what other measures and elements might be taken. But if you just isolate it to that decision it has those impacts."
ON TRANSITION
"It's pretty clear that in the first-best world for Europe and for the United Kingdom there would be some transition to whatever end state is agreed. Exactly what that end state is, exactly what that transition or implementation period will look like or be, that's a core part of the negotiations and it's absolutely for others to answer."
ON INVESTMENT
"If the MPC's current forecast comes to pass, the level of investment in 2020 is expected to be 20 percentage points below the level which the MPC had projected just before the referendum."
"Uncertainties about market access post Brexit is starting to affect business decisions and has consequences for investment. People are not building in possibility of more disruptive process in any way."
"Deferral of investment is going to mean that the supply capacity of the economy expands at a slower rate. The speed limit, if you will, of the economy has slowed... that has consequences, could have consequences for monetary policy, depending on the evolution of demand."
ON SMOOTH BREXIT
"As Brexit negotiations proceed, the assumption of a smooth transition into new economic relations with the EU will be tested, if UK households and businesses look through the flurry of headlines, then the economy can be expected to pick up from its current period of sluggishness...
"It's not so much what we think. It's what UK households and businesses think and how they react to that and at present we do not see any evidence or any material evidence that their expectations is that the transition would be anything but smooth."
"I would underscore though that it's clearly in the interests of both sides in the negotiations to have a smooth transition to whatever the end state is. It's the stated objective of both sides and it is the way the economy is behaving at present so it's the most realistic assumption."
ON RATE HIKE EXPECTATIONS
"We've conditioned the forecast on the market curve, and that curve had more than one interest rate hike over the course of three years. We think that would be insufficient relative to what would be required in order to fulfill our mandate.
"Those increases would be done at a gradual pace and relative ... to a traditional hiking cycle to a limited extent, (it would be) more than the market but less than traditional."
"I don't think its appropriate for me to tie the hands of the committee by expanding on our view as a committee, particularly with respect to timing."
"To recap as clearly as I can in terms of our perspective, we have been operating in exceptional circumstances, we will be for some time, because of the extraordinary nature of the Brexit process and what that has done to all aspects of the economy relevant to the inflation target.
"Those exceptional circumstances have meant that we can take a judgement if we think its appropriate to take a little longer to bring inflation back to target."
ON HOUSEHOLDS
"Households are less vulnerable than they were. Now there are vulnerable households... we certainly recognise that it is a difficult period when real incomes are negative across the country as a whole.
"But in terms of the overall position of households, there is an ability to withstand an adjustment to monetary policy if it's appropriate."
ON STIMULUS
"It would be appropriate, if we knew the world was going to transpire as per our forecasts, to withdraw more stimulus than the market currently has embedded. Timing, degree, amounts - beyond that general direction we're giving you... we're not going to further specify."
ON WAGES
"There's an element of Brexit uncertainty that's affecting the wage bargaining. Some firms, a material number of firms, are less willing to give bigger pay rises as it's not as clear what their market access is going to be over the next few years."
"Real income growth, real income levels in real terms, on average is still below where it was in 2007-08 and that's driven by the private sector. In that context, for a variety of reasons, it's understandable that there's public sector wage restraint.
(Reporting by Alistair Smout, Kate Holton, Emma Rumney and Fanny Potkin)
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