Brexit has damaged Britain’s “openness,” the Bank of England governor said on Wednesday.
Andrew Bailey stressed that as a public official he took “no position” on the decision to quit the European Union.
“That was a decision for the people of the UK,” he said.
“It has led to a reduction in the openness of the UK economy, though over time new trading relationships around the world should, and I expect will, be established.
“Of course, that requires a commitment to openness and free trade.”
Other economists, and the Government’s own watchdog, the Office for Budget Responsibility, have warned that Brexit has delivered a multi-billion pound blow to the UK.
Mr Bailey also warned that interest rates, hammering many homeowners with higher mortgage rates, were not set to fall significantly in the short-term.
He stressed that he was “optimistic” that inflation will come back to the two per cent target within two years, but that rates will likely need to stay high for longer to make that happen.
He said at a conference in Dublin: “Policy is going have to be restrictive for an extended period to see the second half out, which is where policy is going to have to do the work to bring inflation back to target, and I believe it’s going to happen.
“Our forecast suggests we will be back at the target in around the two-year horizon.
“I’m optimistic. I think it will happen but I’m afraid we’ve got to continue doing the work to make it happen.”
He said: “We’re interested in AI (artificial intelligence) from a public policy issue, but like all organisations we’re interested in what we’re going to do with it.
“I think the caution I would have from what I’ve seen so far is that machine learning focuses, if you like, on using vast amounts of data to predict one step ahead. That can be useful, don’t get me wrong.
“It’s not, I think, so useful in terms of the more medium-term forecasting we have to do for monetary policy where you really need a structural model.”
He added: “There’s a lot to be done there, a lot of potential.”
Mr Bailey was speaking alongside Gabriel Makhlouf, Governor of the Central Bank of Ireland, who said central bankers need to be “very cautious about removing the role of judgment when it comes to monetary policy decisions”.
Mr Makhlouf said: “I’m sure there are people out there who think they can develop models that will mean that you can get rid of central bankers because the machines will just tell you the answer.
“Okay, my incentives are distorted here, but I personally don’t think we’re going to reach that.”
