This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2018/may/10/bank-of-england-interest-rate-decision-mark-carney-bt-rbs-trade-business-live

The article has changed 7 times. There is an RSS feed of changes available.

Version 0 Version 1
Bank of England governor Mark Carney defends leaving interest rates on hold again - business live Bank of England governor Mark Carney defends leaving interest rates on hold again - business live
(35 minutes later)
And finally...
Q: The Office for National Statistics has just lowered its estimate of the UK trade deficit by a quarter - so how reliable is Britain’s data, and does it mean that the UK is still ‘reliant on the kindness of strangers’ [an old Carney quote]
Great question, says Mark Carney, who bats it across to deputy Ben Broadbent.
Broadbent explains that economic data can always be revised and updated as new information comes in, and economists update and refine their models. It’s a mistake to treat it as God-given and fixed.
That’s the end of the press conference.
Q: What impact would a hard Brexit have on the Bank’s economic forecasts?Q: What impact would a hard Brexit have on the Bank’s economic forecasts?
Mark Carney replies that a hard Brexit would prompt a change the Bank’s forecasts. But such a scenario it’s not currently included in its economic projections, which are based on a ‘transition deal’ being agreed and implemented.Mark Carney replies that a hard Brexit would prompt a change the Bank’s forecasts. But such a scenario it’s not currently included in its economic projections, which are based on a ‘transition deal’ being agreed and implemented.
Handily for the Bank, the likely end of that transition deal comes beyond its current forecast horizon, so it doesn’t need to map the implications (yet....).Handily for the Bank, the likely end of that transition deal comes beyond its current forecast horizon, so it doesn’t need to map the implications (yet....).
The Bank has, though, been ensuring that Britain’s banks are well capitalised to handle a Brexit shock.The Bank has, though, been ensuring that Britain’s banks are well capitalised to handle a Brexit shock.
Q: Today’s quarterly inflation report suggests that some business surveys are painting a better (and more optimistic) picture of the UK economy than the official GDP data. So which ‘soft’ data do you take seriously?Q: Today’s quarterly inflation report suggests that some business surveys are painting a better (and more optimistic) picture of the UK economy than the official GDP data. So which ‘soft’ data do you take seriously?
Deputy governor Ben Broadbent argues that there’s no contradiction between strong business surveys (which often track sentiment) and weaker GDP data (which measures actual output).Deputy governor Ben Broadbent argues that there’s no contradiction between strong business surveys (which often track sentiment) and weaker GDP data (which measures actual output).
Those business surveys have dropped to lower levels, but they don’t point to anything as weak as 0.1% growth (the official first estimate of UK GDP).Those business surveys have dropped to lower levels, but they don’t point to anything as weak as 0.1% growth (the official first estimate of UK GDP).
Good points from Duncan Weldon of the Resolution Group:Good points from Duncan Weldon of the Resolution Group:
Bank comms quite confusing. “We haven’t really changed our outlook much” coupled with “we are a bit less sure on the rate path”.Feels like an attempt to get out of forward guidance/keep their options open.Bank comms quite confusing. “We haven’t really changed our outlook much” coupled with “we are a bit less sure on the rate path”.Feels like an attempt to get out of forward guidance/keep their options open.
Which given Brexit talks uncertainty this year is sensible. But when you’ll relied on guidance to the extent Carney has, it’s hard to get across that you are genuinely unsure.Which given Brexit talks uncertainty this year is sensible. But when you’ll relied on guidance to the extent Carney has, it’s hard to get across that you are genuinely unsure.
Q: What’s the biggest challenge for your successor, governor? Brexit, perhaps?Q: What’s the biggest challenge for your successor, governor? Brexit, perhaps?
The biggest challenge, and opportunity, for the country is the Brexit negotiations, Mark Carney replies. He won’t be drawn about his replacement, though (Carney is due to leave the Bank in June 2019).The biggest challenge, and opportunity, for the country is the Brexit negotiations, Mark Carney replies. He won’t be drawn about his replacement, though (Carney is due to leave the Bank in June 2019).
Q: Today’s inflation report seems to suggest that interest rates will rise three times in the next three years - should households expect that?Q: Today’s inflation report seems to suggest that interest rates will rise three times in the next three years - should households expect that?
Carney repeats his line that UK households and businesses broadly expect a rate rise this year, and two increases in the next 18 months. But it all depends on how the economy develops.Carney repeats his line that UK households and businesses broadly expect a rate rise this year, and two increases in the next 18 months. But it all depends on how the economy develops.
Q: Hasn’t your message on interest rates been diluted since February (when the Bank said rates would probably rise faster than markets expected)?Q: Hasn’t your message on interest rates been diluted since February (when the Bank said rates would probably rise faster than markets expected)?
Our ‘core message’ hasn’t changed, Carney insists.Our ‘core message’ hasn’t changed, Carney insists.
Q: Isn’t there also a danger that wage pressure will also be more muted than the Bank expects?Q: Isn’t there also a danger that wage pressure will also be more muted than the Bank expects?
Regular pay has been inline with the Bank’s expectations, Carney replies.Regular pay has been inline with the Bank’s expectations, Carney replies.
Some snap reaction to Carney’s press conference:Some snap reaction to Carney’s press conference:
There seem to be two immutable laws of Carney's governorship:1) Rates never go upbut2) Rate rises are always around the corner! pic.twitter.com/LjFJ1MfZHjThere seem to be two immutable laws of Carney's governorship:1) Rates never go upbut2) Rate rises are always around the corner! pic.twitter.com/LjFJ1MfZHj
Bank of England Governor Mark Carney says it's only financial journalists who call him the "unreliable boyfriend". But let us not forget, it was Labour's @patmcfaddenmp who coined it! 😃Bank of England Governor Mark Carney says it's only financial journalists who call him the "unreliable boyfriend". But let us not forget, it was Labour's @patmcfaddenmp who coined it! 😃
Slight dig from Carney on EU financial orgs saying they only just recovered from financial crisis: 'we fixed ours a long time ago'Slight dig from Carney on EU financial orgs saying they only just recovered from financial crisis: 'we fixed ours a long time ago'
Q: Are you failing to communicate to the UK public?Q: Are you failing to communicate to the UK public?
Carney says that the UK public have understood the Bank’s message in recent years, that interest rates will rise gradually as economic conditions merit it.Carney says that the UK public have understood the Bank’s message in recent years, that interest rates will rise gradually as economic conditions merit it.
And he takes a wider view, saying that Britain is in a ‘different place’ than Europe (which has more spare capacity, and has only just fixed its financial system), but also a ‘different place’ than America (which doesn’t face the same scale of uncertainty over its future trading relationship).And he takes a wider view, saying that Britain is in a ‘different place’ than Europe (which has more spare capacity, and has only just fixed its financial system), but also a ‘different place’ than America (which doesn’t face the same scale of uncertainty over its future trading relationship).
People across the UK understand that, Carney adds.People across the UK understand that, Carney adds.
Q: Are you worried that the ‘unreliable boyfriend’ tag will stick, as you’ve once hinted that a rate rise was coming, but not delivered?Q: Are you worried that the ‘unreliable boyfriend’ tag will stick, as you’ve once hinted that a rate rise was coming, but not delivered?
The households and businesses we speak to don’t trade short sterling**, Carney shoots back. They want to know the general orientation of the economy, that the economy is healthy, and the likely path of interest rates.The households and businesses we speak to don’t trade short sterling**, Carney shoots back. They want to know the general orientation of the economy, that the economy is healthy, and the likely path of interest rates.
(** - short sterling is a way of betting on the future path of interest rates).(** - short sterling is a way of betting on the future path of interest rates).
The only people who throw the ‘unreliable boyfriend’ tag at me are in this room, Carney tells the press conference.The only people who throw the ‘unreliable boyfriend’ tag at me are in this room, Carney tells the press conference.
Now everyone else can use it too.Now everyone else can use it too.
Q: The money markets have priced out an interest rate rise this year. Are you happy with that?
Carney repeats that the Bank is primarily concerned with households and businesses (suggesting that he’s focused on higher things than mere City traders and scribblers).
But the Bank is also watching the financial markets, of course. The Bank believes that the underlying momentum in the UK economy will reassert itself, but others can take a different view.
Deputy governor Ben Broadbent chips in too, saying the markets now suggest there is an 85% chance of a rate rise by November 2018.
Onto questions.
Q: In the past you’ve told us to watch the data, but today you’re saying that the economy isn’t as weak as the data suggests. So how should people judge what the Bank is going to do?
Carney doesn’t accept that the Bank is confusing people.
He says that the Bank of England speaks to businesses and individuals across the country. And they expect that interest rates will probably go up a couple of times over the next two couple of years.
The Bank can’t judge exactly how fast the economy will grow - that depends on a range of factors.
But if the economy is growing faster than its speed limit, then domestic inflationary pressures will probably intensify, so some tightening of monetary policy is probably needed.
The Bank’s monetary policy committee believes that the recent slowdown is temporary, Carney adds. But the sensible thing to do is to wait to see if this is born out by data in the months ahead, rather than hike today.
The weather may have improved, but Britain’s economy is still “clouded by Brexit uncertainty” says governor Carney.
The position should become clearer later this year as key decisions about Britain’s future relationship with the EU are made, he adds.
The key points from Carney’s statement thus far:
Carney: was the fall in Q1 growth a one off, or did it suggest broader economic weakness? ”Was it weather, or climate?” Bank suggests it was temporary. Growth will pick up through the rest of year
BoE’s Carney: Labour Market ‘Reassuringly Strong’- Global Growth Above Trend, Despite Softening
BoE’s Carney: Brexit Drag On Economy Is Not Intensifying, Is Persisting
The overall economic climate in the UK looks ‘little changed’, Mark Carney says - perhaps a hint that we shouldn’t get too worried about the lower 2018 growth forecast.
The drag from Brexit on business investment has continued, but has not intensified, says Mark Carney.
On the consumer side, the bank believes that consumption will pick up as the real income squeeze comes to an end.
But the Bank believes that consumption will only grow half as fast as before the EU referendum, and just a third as fast as before the financial crisis.
Overall, the climate is one of modest demand growth, with solid growth in net trade and moderate growth in business investment offsetting more modest growth in household spending, Carney says.
Mark Carney says the UK economy has not met the Bank’s expectations over the last three months.
Growth and inflation have both been lower than the Bank’s forecasts in February, the governor explains.
Carey says the Bank believes this softening is a temporary problem, due to the snowy and icy weather which hit Britain earlier this year.
Adverse weather hit construction particularly badly, he says, and meant people struggled to get to work or the shops.
But the labour market has remained robust, he adds (unemployment is at its lowest rate in four decades, with employment at a record high).
The Bank of England is holding a press conference now to explain today’s decision.
Governor Mark Carney is in the chair, accompanied by deputies Ben Broadbent and SIr David Ramsden.
You can watch it live here:
Reaction to the Bank of England decision is flooding in.
Tom Stevenson, investment director for Personal Investing at Fidelity International, points out that the BoE has pulled another u-turn - having hinted in February that rates would rise today:
“Mark Carney really is the ‘unreliable boyfriend’. Leaving the base rate at 0.5% - what was once thought of as an emergency rate - is another big U-turn for the Bank of England governor.
“Until a few weeks ago, a further quarter point rate hike to 0.75% looked almost guaranteed. But very weak UK GDP growth figures and fast-retreating inflation has seen a rapid reversal of the Old Lady’s increasingly unhelpful forward guidance. The Bank of England has marched investors up to the top of the hill only to march them back down again.
Mark Nash, head of fixed income at Old Mutual Global Investors, says weak economic data prevented the Bank raising borrowing costs today.
The Bank of England (BoE) chose to keep rates on hold at today’s meeting in light of recent weakness in GDP, falling house prices, lower-than-expected inflation and, no doubt, Brexit uncertainty. There has been broad based weakness in economic data across the globe, ex-US, after a strong Q4 2017 that has led central banks to back away from rate hikes in the near term.
Nick Dixon, Investment Director at Aegon, predicts that the Bank will remain cautious in the coming months:
“The last quarter has seen muted economic activity – with growth of only 0.1% – aligned with more modest forecasts of future growth.
“The reasons for caution shown today by the Bank of England are clear. The pound appears to have stabilised reducing future inflation risk, UK growth expectations are lower, and the global picture is less certain.
“We see these forces, reinforced by Brexit uncertainty, persisting into the second half of 2018 and reducing the likely pace of future rate increases.”
The Bank is sticking to its promise that interest rates will probably rise in the months ahead.
The minutes say:
The Committee’s best collective judgement therefore remains that, were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon.
As previously, however, that judgement relies on the economic data evolving broadly in line with the Committee’s projections. For the majority of members, an increase in Bank Rate was not required at this meeting. All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
But until the Bank actually raises interest rates, that reputation of being an ‘unreliable boyfriend’ will linger.