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You can find the current article at its original source at http://www.theguardian.com/business/live/2016/feb/23/stock-market-rally-german-exports-brexit-mark-carney-live
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| Version 0 | Version 1 |
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| Mark Carney: EU referendum driving demand for protection against weaker pound - business live | Mark Carney: EU referendum driving demand for protection against weaker pound - business live |
| (35 minutes later) | |
| 11.48am GMT | |
| 11:48 | |
| Rachel Reeves asks Mark Carney whether he expects the recent falls in sterling to continue. | |
| The governor reiterates that investors have been buying downside protection to protect themselves against falls against the pound, especially against the US dollar [rather than the euro, because it could also suffer if Britain leaves the EU]. | |
| It is safe to say that an element of referendum premium has come into sterling. | |
| 11.42am GMT | |
| 11:42 | |
| Rachel Reeves MP reminds Carney that the latest Inflation Report states that interest rates are likely to rise, not fall. How can he can so confident? | |
| Mark Carney gives a rather dovish answer, says the Bank expects interest rates to rise, gradually, over the forecast horizon. | |
| But of course, if risks increased and the global economy deteriorated, that would have implications. | |
| So do you expect the next move to be up, not down? | |
| Carney replies that the UK domestic economy is positive, but that must be balanced with disappointing signs from abroad. We must weigh the two up, and we’re not taking a policy decision today. | |
| Fascinating. At TSC Rachel Reeves asks Carney whether he still thinks next move will be up rather than down. He stonewalls. Big shift... 1/2 | |
| 11.38am GMT | |
| 11:38 | |
| Carney: No intention of imposing negative rates. | |
| Mark Carney moves swiftly to crush speculation that the Bank of England could hit UK banks with negative interest rates. | |
| We have absolutely no intention, no interest, in doing that [imposing negative rates]. | |
| He adds that mortgage rates in Switzerland have actually gone up, even though the Swiss central bank have imposed negative borrowing costs. | |
| NEVER BELIEVE ANYTHING UNTIL IT IS OFFICIALLY DENIED! Jim Hacker https://t.co/RpNdCAUig5 | |
| 11.36am GMT | |
| 11:36 | |
| Can you explain the impact of negative interest rates on banks in simple terms, Steve Baker asks? | |
| MPC member Gertjan Vlieghe outlines how banks have assets, which are loans, and liabilities, which are deposits. | |
| They make a profit by charging borrowers more than they pay to savers. | |
| So far, no commercial bank has passed on negative interest rates to its depositors. | |
| So...as you lower interest rates more and more, the return on the assets goes down and down but there is no way to balance that with lower returns to savers. | |
| In conclusion: The lower interest rates go, the harder it is for banks to make a profit. | |
| Q: And do you need to abolish cash to allow negative interest rates to be imposed? | |
| Deciding whether people are allowed to hold cash is not one of our tools, Vlieghe replies. | |
| 11.27am GMT | |
| 11:27 | |
| Steve Baker MP asks what the distributional impact of negative interest rates would be. | |
| It’s too early to say, replies deputy governor Minouche Shafik. Central banks in several areas, including Switzerland, Denmark, Japan and the eurozone, now charge banks to leave money with them. | |
| However, this has not generally fed through to consumers - so we don’t have the data to show the impact on the public. | |
| Gertjan Vlieghe adds that it’s very hard to say how banks will react to negative interest rates - it depends on each institution. | |
| 11.21am GMT | |
| 11:21 | |
| Mark Carney also insists that the Bank could launch fresh stimulus measures. It could cut interest rates closer to zero, from 0.5% today, or buy more assets though QE. | |
| 11.20am GMT | |
| 11:20 | |
| Martin Weale says the Bank of England has more tools in the toolbox to stimulate the UK economy if needed. | |
| That could include fresh asset purchases though its QE programme [which the Bank has used to buy £375bn of UK government debt]. | |
| 11.16am GMT | |
| 11:16 | |
| Jacob Rees-Mogg MP asks whether the recent fall in bank share prices reflects the macro-economic environment. Or something else? | |
| Mark Carney says it is primarily due to the macro picture. He cites ‘mildly disappointing’ data and uncertainty about the policy stance in emerging and advanced economies. | |
| That caused a “renewed appreciation” that we are in an environment of low nominal growth -- a difficult environment for banks. | |
| On top of that, Carney adds, there are some concerns in investing circles about the impact of negative interest rates on bank profitability. | |
| 11.07am GMT | 11.07am GMT |
| 11:07 | 11:07 |
| BoE policymaker: Brexit fears could hurt real economy | BoE policymaker: Brexit fears could hurt real economy |
| Dr Gertjan Vlieghe, a member of the Monetary Policy Committee, now warns MPs that the uncertainty over the In-Out EU referendum could hurt the UK economy. | Dr Gertjan Vlieghe, a member of the Monetary Policy Committee, now warns MPs that the uncertainty over the In-Out EU referendum could hurt the UK economy. |
| Asked about the impact of the weaker pound, he says that on its own, a weaker currency should boost inflation and growth. But the current situation is more complex, given the possibility of Brexit . | Asked about the impact of the weaker pound, he says that on its own, a weaker currency should boost inflation and growth. But the current situation is more complex, given the possibility of Brexit . |
| Vlieghe tells the Treasury Committee that: | Vlieghe tells the Treasury Committee that: |
| We think the exchange rate is falling because of increased uncertainty about what’s going to happen in the period leading up to, or the period following, the referendum. | We think the exchange rate is falling because of increased uncertainty about what’s going to happen in the period leading up to, or the period following, the referendum. |
| It is possible at some point that increased uncertainty from foreign exchange investors also ends up manifesting itself in increased uncertainty by households and businesses which may, or may not, delay or reduce their spending. | |
| So far we haven’t seen very clear evidence of that, but we are watching very carefully. | So far we haven’t seen very clear evidence of that, but we are watching very carefully. |
| So it’s not at all obvious that a weaker pound is a net boost to the economy, concludes Vlieghe, who worked for a hedge fund before being appointed to the MPC last summer. | So it’s not at all obvious that a weaker pound is a net boost to the economy, concludes Vlieghe, who worked for a hedge fund before being appointed to the MPC last summer. |
| Jan Vlieghe gives textbook 'source of the shock' account of why fall in £ isn't necessarily net stimulative. Quite right. | Jan Vlieghe gives textbook 'source of the shock' account of why fall in £ isn't necessarily net stimulative. Quite right. |
| Updated | |
| at 11.18am GMT | |
| 10.56am GMT | 10.56am GMT |
| 10:56 | 10:56 |
| Carney: EU referendum has weakened the pound | Carney: EU referendum has weakened the pound |
| Back to the pound.... and Martin Weale says the recent fall in sterling should push inflation up (as it makes imports more expensive) | Back to the pound.... and Martin Weale says the recent fall in sterling should push inflation up (as it makes imports more expensive) |
| Mark Carney says he agrees, adding that the recent fall in the pound is partly due to the EU referendum [reminder, it hit a seven year low on Monday]. | Mark Carney says he agrees, adding that the recent fall in the pound is partly due to the EU referendum [reminder, it hit a seven year low on Monday]. |
| Carney addes that the Bank “will take the exchange rate as given” --[ie, it will not make predictions about the referendum result, and its impact on sterling]. | Carney addes that the Bank “will take the exchange rate as given” --[ie, it will not make predictions about the referendum result, and its impact on sterling]. |
| And the Bank’s agents across the UK will be watching for signs that business confidence has been hit by exchange rate moves. | And the Bank’s agents across the UK will be watching for signs that business confidence has been hit by exchange rate moves. |
| BoE Carney "Recent declines in GBP have been influenced by the up coming #Brexit vote" | BoE Carney "Recent declines in GBP have been influenced by the up coming #Brexit vote" |
| Updated | Updated |
| at 10.57am GMT | at 10.57am GMT |
| 10.51am GMT | 10.51am GMT |
| 10:51 | 10:51 |
| The committee is keen to find out whether the Bank of England will make a profit or a loss on its bond-buying quantitative easing programme. | The committee is keen to find out whether the Bank of England will make a profit or a loss on its bond-buying quantitative easing programme. |
| After all, the richest households have certainly benefitted, because QE drives up asset prices. And we know who holds them..... | After all, the richest households have certainly benefitted, because QE drives up asset prices. And we know who holds them..... |
| 10.47am GMT | 10.47am GMT |
| 10:47 | 10:47 |
| Tyrie then turns to Britain’s banks - is Carney confident that they are robust enough to rise out another crisis? | Tyrie then turns to Britain’s banks - is Carney confident that they are robust enough to rise out another crisis? |
| He points out that Sir John Vickers, who conducted a major inquiry into the UK financial sector after the 2008 crisis, has warned that the banks haven’t gone far enough. What’s your view, governor? | He points out that Sir John Vickers, who conducted a major inquiry into the UK financial sector after the 2008 crisis, has warned that the banks haven’t gone far enough. What’s your view, governor? |
| Carney insists that the UK banks have met the new capital requirements. | Carney insists that the UK banks have met the new capital requirements. |
| So why have bank shares fallen so sharply? Carney blames worries about profitability, not solvency: | So why have bank shares fallen so sharply? Carney blames worries about profitability, not solvency: |
| Since the start of the year bank stocks have been under pressure. There are a variety of causes of that but what is not a cause, what it does not indicate in my view is concerns about the resilience of the institutions. | Since the start of the year bank stocks have been under pressure. There are a variety of causes of that but what is not a cause, what it does not indicate in my view is concerns about the resilience of the institutions. |
| “The fundamental concerns are about the returns of the institutions.” | “The fundamental concerns are about the returns of the institutions.” |
| 10.38am GMT | 10.38am GMT |
| 10:38 | 10:38 |