Sea change Speech given by Mark Carney, Governor of the Bank of England  Local Government Association Annual Conference and Exhibition 2019, Bournemouth 2 July 2019  I am grateful to Clare Macallan and James Benford for their assistance in preparing these remarks, and to Charles Gundy, Emil Iordanov, David Glanville, George Rodger, Alison Schomberg, Anina Thiel, Mo Wazzi and Gabija Zemaityte for background research. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  It is a pleasure to join this Local Government Association (LGA) conference. The LGA supports councils across the country as they deliver local solutions to national problems, helping them to build the skills they need and ensuring the voice of local government is heard at the national level. My only regret is not being able to enjoy the beaches for which Bournemouth is rightly famous. The closest I will get is using a nautical analogy – a sea change. A sea change is a profound transformation. The term was originally coined by Shakespeare in The Tempest, of which there are five productions across Dorset this summer.1 These productions will mix tragedy and comedy in a play whose themes range from magic and creation to betrayal and revenge. My focus is more limited and prosaic – but also more immediately relevant to your work. In recent months, there has been a sea change in financial markets driven by growing concerns over the global economic outlook.
11  13  All speeches are available online at www.bankofengland.co.uk/news/speeches  13  Global developments, Brexit and UK monetary policy Now consider the implications of global developments for the outlook for UK inflation and growth Unlike many other jurisdictions, inflation in the UK is currently at the MPC’s 2% target, the labour market remains tight with wages and unit labour costs growing at target-consistent rates, and inflation expectations of UK households and businesses remain well-anchored. The UK outlook also continues to be shaped by Brexit. Until the turn of the year, the UK economy had been growing around its trend rate. As the MPC had anticipated, this year increased Brexit uncertainty is causing volatility in the UK data. Output increased by 0.5% in the first quarter of this year, boosted by an important contribution from companies bringing forward production to build stocks ahead of the potential 29th March cliff edge. Growth in the second quarter will be considerably weaker, in part due to the absence of that stock building effect and Brexit-related, temporary shutdowns by several major car manufacturers. 12 Recent data also raise the possibility that the negative spillovers to the UK from a weaker world economy are increasing and the drag from Brexit uncertainties on underlying growth here could be intensifying. The latest surveys point to no growth in UK output. Looking across the first half of the year, in my view, underlying growth in the UK is currently running below its potential, and is heavily reliant on the resilience of household spending.