Bank of England Governor Mr Carney warned business may soon have to activate contingency plans, depending on how Brexit talks go.
Speaking to London’s banking community alongside finance minister Philip Hammond a day after exit negotiations begun he said: “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.
“Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU.
Last week, three BoE policymakers of the eight on the Monetary Policy Committee unexpectedly voted to raise interest rates.
Mr Carney voted to keep them at a record low 0.25 per cent and gave no sign he was in a rush to change his view.
He warned of a weak wage growth and a likely hit to incomes.
The Bank of England added: “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.
“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 reality of Brexit negotiations.”
Mr Carney also underlined the importance of trade liberalisation – especially in financial services – and said it was unclear if Britain’s large current account deficit was yet on a sustainable footing.
He said the UK will find out gif Brexit is “path to a land of cake and consumption”.
Mr Carney’s speech was postponed last week because of the devastating fire in Grenfell Tower.
Britain went from being one of the fastest-growing economies among the Group of Seven nations in 2016 to its slowest in early 2017 as the fall in the value of the pound after the Brexit referendum pushed up inflation and hit consumer spending.
While the drag from inflation on the world’s…