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Bank of England Governor: Bank Will Protect Economic Growth

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'Evidence from the past quarter century across a range of countries suggests episodes of consumption-led growth tends to be both slower and less durable, ' he said.

Mark Carney has confirmed the Bank of England (BoE) was closely monitoring developing trends in consumer spending, after suggestions Britons were using their savings to keep spending, despite rising inflation.

In the year to November, Carney said that total household borrowing rose 4%, while consumer credit went up by more than 10% - the fastest rate since 2005.

And he warned that a reliance on consumer spending for economic growth, rather than on exports or investment, did not bode well for the future.

The Consumer Price Index (CPI) measure of inflation is forecast to hit 1.4% in December, up from 1.2% in November and 0.9% in October. Domestically, Carney sees households "looking through Brexit uncertainty", which has led to solid consumer growth momentum.

"In the MPC's November projections, this resolution is expected to occur as imported inflation begins to weigh in the coming months on people's real incomes, slowing consumption growth".

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In his speech, Carney stood by the BoE's decision to cut interest rates to a record low in August, in a bid to limit job losses following the Brexit vote, even if that meant allowing inflation to surpass the Bank's stated 2% target.

"Monetary policy can respond, in either direction, to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the 2 percent target", Carney said, echoing the BoE's existing policy stance.

Sterling fell below $1.20 to one of its lowest levels in the past 30 years on Monday due to fears May will prioritize curbing immigration over retaining close economic ties with the European Union when she starts formal exit talks later this year.

He said that bringing inflation back to target too rapidly could cause "volatility in out and employment", but added that "there are limits to the extent to which above-target inflation can be tolerated". In the coming years, the United Kingdom will redefine its openness to the movement of goods, services, people and capital.

"Fully offsetting the persistent effects of sterling's depreciation on inflation would have required exerting further downward pressure on domestic costs", the BoE governor added.

The remit requires the MPC to consider, balance and explain such short-run monetary policy trade-offs, he added.

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