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| 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) | |
| After years of playing the ‘unreliable boyfriend’, Mark Carney is turning into the tetchy husband who keeps promising to take the bins out, but never quite gets round to it. | |
| Today’s excuse for not raising interest rates is that the UK economy has slowed in recent months, as the Beast From The East hit construction activity and kept shoppers off the high street. A fair point. | |
| In the same breath, Carney sounds confident that the economy will rebound in the months ahead - even though the Bank has cut its 2018 growth forecast from a moderate 1.8% to a modest 1.4%. | |
| Faced with repeated questioning about his failure to raise borrowing costs, the governor declared: | |
| What’s the sensible thing to do? Do you act now or do you wait to see evidence that that momentum is re-asserting? | |
| “The judgement of the majority of the committee is you wait to see for some evidence of that reasserting.” | |
| So, we can all expect the bins to finally be dragged out at the Bank’s next meeting, in June? Or perhaps August (when the BoE will hold its next ‘Super Thursday’ press conference)?.... | |
| Not necessarily. Mark Carney is refusing to make any sweeping commitments. He even argues that the British public isn’t too fixated on the timing of rate rises, and understands they’ll happen at the appropriate time. | |
| He said: | |
| The expectations of those individuals - more than three-quarters of those, whether they’re individuals or businesses - is that interest rates are going to go up, are likely to go up at some point over the course of the next years,probably a couple of times over the next year, year and a half.” | |
| “So they are in a position that they can plan accordingly for that possibility, they don’t think it’s a guarantee, they think it’s a likelihood.” | |
| Andrew Sentance, a former member of the MPC, isn’t impressed: | |
| The Monetary Policy Committee has been replaced by the Manyana Policy Committee. Interest rates are always going to rise tomorrow, never today. | |
| The #MPC appears to have totally misunderstood recent disappointing UK economic performance. Monetary policy uncertainty and persistent low interest rates are having a negative impact on growth, not least by undermining sterling which squeezes consumers through higher inflation. | |
| Carney could, rightly, point out that the Bank should hold off raising interest rates until we have more clarity on the UK’s future trading relationship with the EU. But that might be too political for the governor, | |
| Instead, he cautioned: | |
| While the storms of February and March have given way to sunnier skies, the economic outlook for the UK remains clouded by Brexit uncertainties. | |
| Despite the welcome agreement on a transition period, the terms on which the UK will trade with the EU beyond that period remain to be determined.” | |
| Mark Carney also tried to rise above the fray, arguing that families aren’t busy trading the ‘short-sterling’ rates in an attempt to predict interest rate moves. True, but those financial instruments still really matter (as Carney understands all too well, of course). | |
| Carney: Households don't trade short-sterling. Quite right, but some have mortgages tied to Bank Rate. It's still important. | |
| So when might UK interest rates actually go up? Yael Selfin, Chief Economist at KPMG in the UK, thinks it might not happen until November - which would be a year after the last hike. | |
| She writes: | |
| “Faced with weaker economic data in the first quarter of 2018, the Bank of England’s Monetary Policy Committee decided to opt for caution and to leave interest rates unchanged at 0.5% today. While the decision had been largely anticipated, it marks a significant shift from expectations only a few weeks ago for a rate rise in May. | |
| “The strong labour market, together with a range of business surveys as well as what we see on the ground talking to our clients, do not point to a material shift in the economic environment, and support the view that the weakness at the start of the year is likely to be at least partially reversed further on this year. | |
| “While on paper there are a number of opportunities for the MPC to raise rates this year, the next rise may now only take place in November. It is likely to coincide with a new Inflation Report and the MPC may wish to avoid a rate rise in August when markets are thinner and businesses and households could be caught off-guard while on holiday. That would make a relatively long delay in policy action due to a potential short blip in data.” | |
| Oh, and what about *that* nickname? Well, governor Carney looked rather tired of being labeled an unreliable suitor (a moniker that dates back to 2014). He told the press: | |
| The only people who throw that term at me are in this room. | |
| So now everyone else can throw it at me when I go out of this room.” | |
| And finally... | 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] | 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. | 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. | 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. | 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/LjFJ1MfZHj | 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/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. |