Ben Broadbent: Brexit and interest rates

Speech by Mr Ben Broadbent, Deputy Governor for Monetary Policy of the Bank of England, at the London School of Economics, London, 15 November 2017.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction and summary

Hello! It's a real pleasure to come to the LSE to give this talk.  It's a great institution; I'm fortunate to have many friends here;  last, but not least, it's barely a hop and a skip from my office.  So thank you for having me.  

It won't have escaped your attention that the MPC raised interest rates earlier this month.  It did so, in part, because of the referendum-related decline in sterling's exchange rate.  That has pushed up CPI inflation and will continue to do for some time yet, as the rise in import costs is passed through to retail prices.  Our remit says we can accommodate such effects, and take our time in bringing inflation back to target, but only so long we also think there's spare capacity in the economy.  As unemployment has declined that position has become harder to maintain.