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Speaking to lawmakers on the Treasury Committee Tuesday, Carney said that compared to the bank’s forecasts made in May 2016 -- which were based on the U.K. voting to stay in the European Union -- economic output is more than 1 percent below where officials had expected. That “was predicated on a relatively weak European and global economy,” Carney said, an assumption that has also not panned out in recent years.
Taking the better-than-expected world growth since then, the economy is up to 2 percent worse off than officials could have expected, the governor said. That’s a 900-pound difference when translated into household incomes, “which is a lot of money.”
“There are Brexit effects that come through,” he said, citing inflation driven by the pound’s decline after the referendum vote alongside sluggish wages. The U.K.’s poor productivity performance is also a factor, he said, as well as weak investment spending.
Chancellor of the Exchequer Philip Hammond hit back when challenged about the comments in Parliament, saying it is too early to make an assessment.
“On the question of future trajectory of household incomes, that will depend in part on the quality of the deal that we negotiate as we exit the European Union and we are focused on getting the very best deal for British jobs, for British prosperity for British businesses,” he said.