In a speech at London’s Mansion House, Carney (pictured) said monetary and macro-financial measures announced last summer to support the economy during the Brexit transition are working.

“Credit is widely available, the cost of borrowing is near record lows, the economy has outperformed expectations, and unemployment has reached a 40 year low,” he said.

While acknowledging that above-target inflation cannot be allowed to continue indefinitely, Carney said he did not believe the time is right for a rate increase.

“Given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment,” he said.

“In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.”

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Brexit contingency plans

Carney added that firms on either side of the channel may soon need to activate contingency plans around Brexit.

“Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption.”

He also pointed to the UK’s historically large current account deficit. While the deficit is funded in domestic currency and financial reforms have increased the resilience of the UK system, Carney said the deficit has also been associated with markedly weak investment and latterly with rapid consumer credit growth.

“This is not an imbalance that is, as yet, funding its eventual resolution,” he said.

“The extent to which the UK’s deficit has moved closer to sustainability remains an open question, one whose answer depends crucially on the outcome of the Brexit negotiations. Most fundamentally, the UK relies on the kindness of strangers at a time when risks to trade, investment, and financial fragmentation have increased.”