"Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans."
During his Mansion House speech this morning, Carney cited mixed signals on consumer spending and business investment as well as "anaemic wage growth" as his reasons for holding off on a rate rise.
He continued: "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."
Carney admitted that since the Brexit vote the UK’s economic prospects have dwindled but said that monetary policy "cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU".
He did however state that the stimulus introduced last summer, which included cutting Bank Rate to 0.25%, is working and that such measures can support households and businesses as they adjust to "such profound change".
He noted that different members of the MPC "will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase" but that any changes would be "limited in scope and gradual in pace".
Carney concluded: "During the negotiating period the economy will be importantly influenced by the expectations of households, firms and financial markets about the nature of both the transition and the longer term economic relationships with the EU and other countries.
"Markets have already anticipated some of the adjustment. Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans. 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."
