LONDON – The Bank of England has limited power to prevent the painful economic adjustments that will come as a result of Brexit, Governor Mark Carney said on Thursday morning.
Speaking at the bank’s “Independence: 20 Years On” conference to mark the beginning of its independence in 1997, Carney said senior policymakers do not have “omnipotence” and cannot completely offset any economic hardship caused by Brexit.
“While carefully circumscribed independence is highly effective in delivering price and financial stability, [the BoE] cannot deliver lasting prosperity and it cannot solve broader societal challenges,” he said at the City of London’s Fishmongers’ Hall.
“This bears emphasising, because in recent years a host of issues has been laid at the door of the Bank of England from housing affordability to poor productivity.
“Calls for the Bank to solve these challenges ignore the Bank’s carefully defined objectives. And they confuse independence with omnipotence.”
“The biggest determinants of the UK’s medium-term prosperity will be the country’s new relationship with the EU and the reforms it catalyses,” he said.
“Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU.”
Carney also used the speech to emphasise the continued role of “experts” in shaping economic, financial, and political challenges in the UK.
“So-called experts,” have come under fire from certain Brexiteers in the year or so since Britain voted to leave the European Union, with Carney drawing particular ire from the likes of Tory MPs Jacob Rees-Mogg and Michael Gove.
“The need for the bank to be open and accountable is greater than ever, not only because of the growing distrust of institutions and the ‘experts’ who reside within them, but also because better public understanding makes our policies more effective,” Carney said in a thinly-veiled rebuttal to such comments.