Delivering a major reassessment of the economy just over a year after the referendum, the governor of the Bank of England claimed that the United Kingdom would not be able to grow as fast as it otherwise might and that "the de-integration effects of Brexit can be expected to.be inflationary".
Even if the BoE does hike interest rates from 0.25% to 0.50% sooner rather than later, it is highly likely that they will tread very carefully on further increases.
His comments will anger Brexiteers who have accused Mr Carney of being too pessimistic and come after Boris Johnson's proclamation of a "glorious Brexit" over the weekend.
Brexit-related uncertainties have forced some companies to delay their investment decision, he said in a speech at the International Monetary Fund.
He added that any looming increases in borrowing costs likely will be gradual in pace and limited in extent.
Speaking in support of that stance, he described Brexit as inflationary, while saying that the rate setting panel has a responsibility to curb such trends.
The Governor pointed out that the fall in income would be inevitable, as households are now cutting down on consumption and spending, "slowing the economy". The ECB is likely to announce plans next month for phasing out its bond-buying program in response to a buoyant eurozone economy. Economic growth slowed in the first half of the year and inflation has accelerated to nearly 3%. A new factor that Mark Carney introduced in his speech was that "the case for a modest monetary tightening is reinforced by the possibility that global r*(equilibrium interest rate) may be rising, meaning that monetary policy has to move in order to stand still". Brexit may give us the freedom to form new trade deals, but those deals will take time to build, and Britain needs a plan for dealing with the interim period.
An economics think tank says the Bank of England's (BOE) latest policy adjustment will allow the United Kingdom to offset post-Brexit headwinds, restoring consumer spending and investment.
Some of Carney's comments were interpreted as more dovish in the wake of last week's MPC statement, reinforcing the view that the rate-hike cycle in the United Kingdom will be very shallow-or "limited and gradual", to use Carney's phrase.
"There remain considerable risks to the United Kingdom outlook, which include the response of households, businesses and financial markets to developments related to the process of European Union withdrawal", he said. He also said the economy would underperform the Group-of-Seven average through mid-2018.