MNI POLICY: BOE Carney Says Global Economy Decelerating

By David Robinson

     LONDON (MNI) - Bank of England Governor Mark Carney said the global economy

was slowing and downside risks have intensified.

     Following are key points from the speech at a Financial Times event in

London:

     --Carney said nothing about the likely timing of the next UK rate hike or

the amount of tightening that would likely be required. While gradual tightening

would continue to be justified if the BOE's central Brexit scenario plays out,

he highlighted downside risks.

     --The global economy is decelerating and downside risks have intensified

but he most likely outcome is that growth stabilises around a new, lower trend

rather than sliding towards recession.

     "Global momentum is now weakening in all major regions and downside risks

have intensified. The proportion of the global economy growing above trend has

fallen from four-fifths to one-third," he said.

     --Carney stressed that the Bank's central scenario, of global economic

growth stabilising, is only the most likely outcome and that risks to the

downside are clear. A trend to protectionism is showing up in reduced trade and

an intensification of the trade wars would hit global growth harder.

     "Risks from China and from de-globalisation are significant and growing,"

Carney said.

     Trade growth is lagging global growth, and Bank estimates suggest a 10%

rise in US tariffs would knock 1 percentage point off global growth through

trade channels alone.

     --Carney cited Brexit as a test case, showing whether a way could be found

to keep an economy open while dealing with popular concerns over democratic

accountability.

     "It is in the interests of everybody ... that a Brexit solution that works

for all is found in the weeks ahead," he said.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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