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Mark Carney answers questions at House of Lords – live Mark Carney answers questions at House of Lords – live
(35 minutes later)
4.52pm BST
16:52
Question: Given government can borrow at low rates and investing, shouldn’t they take advantage of that?
Carney says have to be careful in fiscal policy about what is temporary and what is baked in system. I agree, given interest rate, relative return on a positive doesn’t have to be that high when there is tax revenues and an asset alongside it. But those decisions are decisions of the government.
4.50pm BST
16:50
Question: Is monetary policy now too loose and fiscal policy too tight?
Carney says adjusting fiscal policy is much slower than adjusting monetary policy, it needs budget, legislation.
So there is a need to understand the fiscal policy of the government and take it into account. Appropriate for chancellor and governor to discuss how the economy is and what should be done.
4.45pm BST
16:45
Away from Carney and back to the pound’s slide. Neil Wilson, markets analyst at ETX Capital said:
There is no clear reason for the dip but once the run on the pound starts these days it’s hard to find buyers at any natural or obvious levels...It just goes to show how bearish the sentiment is around the pound at the moment. It doesn’t take a lot to send sterling south at the moment.
Of course it’s good news for all those dollar earners on the FTSE 100, which rallied strongly on the pound’s fall before a big bought of profit taking around 15:20-30 pared the day’s gains.
4.45pm BST
16:45
Question: Is there too much uncertainty now for forward guidance to be useful?
Carney says it is useful in certain circumstances, in the exit from unconventional policy.
4.38pm BST
16:38
Lamont: Why are you now buying corporate bonds?
Carney says this provides a different channel of stimulus. It is more powerful pound for pound than QE. We are buying neutrally, companies important to UK economy.
[Lamot: McDonald’s?] Yes, it is part of the UK economy, providing jobs.
It encourages issuance in that market, also frees up bank balance sheets to lend to smaller businesses and households.
4.35pm BST
16:35
Carney - cannot conceive Chancellor would refuse Bank's QE moves
Lamont: QE has been described as a mixture of fiscal and monetary policy. So independence of central banks has already gone. If Treasury has to approve each tranche of QE, then independence is surely compromised?
Carney says the decision is made by the MPC, the Treasury makes decision on Bank balance sheet independently. I have to explain to chancellor the rationale, and he or she will want to be satisfied on that before putting balance sheet forward. Can’t conceive of circumstance where chancellor would not provide that.
Updated
at 4.41pm BST
4.32pm BST
16:32
We would not slavishly rely on QE - Carney
Question from Lord Lamont: Back to QE, how long will it go on. Is it still effective. The distortions are becoming larger, especially in bond market. Companies are cutting dividend to fund pension liabilities. My fear, this will only end in tears.
Carney says he does not share that view.
The package in August had four elements, part of the reason was to provided stimulus but also to show we would not slavishly rely on QE.
After the first QE programme, they tend to have less of an influence on asset prices. The August announcement has as large an impact as any, [because it was part of a package].
On side effects, we are mindful of side effects. We did look at impacts on pension funds, insurance companies, margins and profitablity of banks and building societies, to satisfy ourselves sum of side effects did not outweigh positives. Case was strong so we pursued it.
On pension funds, the challenge is as much due to a lag in equity performance compared to yields elsewhere. So its a broader problem.
{Lamont: QE helping that problem}
Carney says its whether you think QE is responsible for low rates. [He clearly doesn’t]
The concerns about risks in the global environment are quite elevated.
Updated
at 4.40pm BST
4.26pm BST
16:26
Question: is there anything to be done to make sure the City remains the pre-eminent financial centre post-Brexit?
We start from a position where it is Europe’s financial centre.
[On euro clearing moving from London] there is no need for currency clearing to take place in the currency’s jurisdiction. It is broader discussion in the political realm.
From our point of view, we need to retain world class supervision and regulation. We need to ensure - issue for government and private sector - that non-euro activity continues to grow in London.
We need to come to some sort of broader agreement on aspects of wholesale finance.
Yes some business would migrate, but City will grow other business from elsewhere.
4.20pm BST4.20pm BST
16:2016:20
Carney says he expects the EU to give serious consideration to equivalence of UK financial regulation.Carney says he expects the EU to give serious consideration to equivalence of UK financial regulation.
Carney says we do not want to have our hands tied to import ad infinitum financial rules made elsewhere.
Updated
at 4.21pm BST
4.14pm BST4.14pm BST
16:1416:14
The pound has recovered some ground during the course of Carney’s appearance so far. Having fallen as low as $1.2084 earlier, and recovering to $1.2121 as he began, it is now at $1.2135, still down 0.7% on the day.The pound has recovered some ground during the course of Carney’s appearance so far. Having fallen as low as $1.2084 earlier, and recovering to $1.2121 as he began, it is now at $1.2135, still down 0.7% on the day.
4.11pm BST4.11pm BST
16:1116:11
Question: is BBA irresponsible suggesting banks are ready to leave imminently?Question: is BBA irresponsible suggesting banks are ready to leave imminently?
There is much uncertainty, and in an environment where profitability is stretched. Some may take decisions earlier than others.There is much uncertainty, and in an environment where profitability is stretched. Some may take decisions earlier than others.
There are discussions [to be held with the EU], it would be precipitate to make decisions [before then].There are discussions [to be held with the EU], it would be precipitate to make decisions [before then].
4.08pm BST4.08pm BST
16:0816:08
Question: any evidence banks are planning to relocate out of London?Question: any evidence banks are planning to relocate out of London?
Carney says as supervisor of banks, we are aware of contingency plans at various stages of readyness. Some would be in a position to adjust activities within the next year if they saw fit.Carney says as supervisor of banks, we are aware of contingency plans at various stages of readyness. Some would be in a position to adjust activities within the next year if they saw fit.
4.07pm BST4.07pm BST
16:0716:07
Question: US rates are expected to rise, does that not depress the pound. The Bank has also failed to meet its inflation target.Question: US rates are expected to rise, does that not depress the pound. The Bank has also failed to meet its inflation target.
Carney says there were four elements to August’s package, sterling barely moved, the market understood what we were doing.Carney says there were four elements to August’s package, sterling barely moved, the market understood what we were doing.
When does sterling move, asks Carney. When it becomes clear on the timing of Article 50 and the market’s perception on the relationship between UK and EU. It’s a bit early to determine that. PM says she will get best deal, there have been no discussions.When does sterling move, asks Carney. When it becomes clear on the timing of Article 50 and the market’s perception on the relationship between UK and EU. It’s a bit early to determine that. PM says she will get best deal, there have been no discussions.
But the market’s perception influences a perception of the supply situation of the econmy. That perception may well be mistaken.But the market’s perception influences a perception of the supply situation of the econmy. That perception may well be mistaken.
We have to take account of where sterling is and how persistent it will be.We have to take account of where sterling is and how persistent it will be.
The 6.5% movement in currency since the Conservative party conference has largely been driven by a single factor, not monetary policy.The 6.5% movement in currency since the Conservative party conference has largely been driven by a single factor, not monetary policy.
As for US, there has been an increased perception that Fed will raise rates by the end of the year. That has contributed to generalised dollar strength.As for US, there has been an increased perception that Fed will raise rates by the end of the year. That has contributed to generalised dollar strength.
But with sterling it is more the perception of that fundamental factor.But with sterling it is more the perception of that fundamental factor.
[On the inflation target] in terms of the undershoot, the explanation was huge moves in oil and commodity prices.[On the inflation target] in terms of the undershoot, the explanation was huge moves in oil and commodity prices.
The judgement the MPC has to make, we see inflation rising above target in year’s 2 and 3, due to depreciation of sterling in the first half of this year, so our judgement is how quickly we return inflation to target.The judgement the MPC has to make, we see inflation rising above target in year’s 2 and 3, due to depreciation of sterling in the first half of this year, so our judgement is how quickly we return inflation to target.
Should we raise rates in August and get it to 2%, at the cost of jobs and income in the economy. Or is it wiser to look through that exchange rate move and help economy adjust. In the view of every member, it was the right course of action to provide stimulus at that point.Should we raise rates in August and get it to 2%, at the cost of jobs and income in the economy. Or is it wiser to look through that exchange rate move and help economy adjust. In the view of every member, it was the right course of action to provide stimulus at that point.
4.00pm BST4.00pm BST
16:0016:00
Why cut interest rates after Brexit when suggested not beforehand?Why cut interest rates after Brexit when suggested not beforehand?
Carney says monetary policy would depend on supply, demand and the exchange rate. The balance of those forces which effect the path of policy.Carney says monetary policy would depend on supply, demand and the exchange rate. The balance of those forces which effect the path of policy.
The MPC decision is not automatic. There were scenarios when.. appropriate response would have been to tighten.The MPC decision is not automatic. There were scenarios when.. appropriate response would have been to tighten.
But in fact the balance was consistent with the Bank supplying more stimulus to support the economy during a period of adjustment.But in fact the balance was consistent with the Bank supplying more stimulus to support the economy during a period of adjustment.
That stimulus has its limits. The balance can shift. We don’t target exchange rate, we target inflation..but we are not indifferent.That stimulus has its limits. The balance can shift. We don’t target exchange rate, we target inflation..but we are not indifferent.
3.56pm BST3.56pm BST
15:5615:56
Decision whether to stay at Bank entirely personal - CarneyDecision whether to stay at Bank entirely personal - Carney
Question. There has been talk about Carney leaving. What are the factors for Carney staying or going?Question. There has been talk about Carney leaving. What are the factors for Carney staying or going?
Carney says he needs time to reflect, it’s an entirely personal decision. No one should read into it anything about government policy, past, present, intentional.Carney says he needs time to reflect, it’s an entirely personal decision. No one should read into it anything about government policy, past, present, intentional.
UpdatedUpdated
at 4.16pm BSTat 4.16pm BST
3.54pm BST
15:54
Baroness Wheatcroft question: On the prime minister’s comments, she said monetary policy was an effective emergency measure and a change has to come. Does that mean monetary policy?
Carney says he does not think she meant a change in monetary policy.
Question: how long will it take to get there (normal interest rates etc)?
The framework is there, we fully understand if not welcome criticism of how we’re doing our job to get to inflation target. With time as the government prosecutes its discussions with EU, uncertainties will reduce.
There are broader forces in global economy which may take longer to dissipate.
3.49pm BST
15:49
Carney says it is frustrating to have interest rates so low for so long.
He says he has sympathy with savers, but says the Bank’s focus is on its remit to get inflation where it needs to be.
3.46pm BST
15:46
Change inflation target to help savers?
Carney says to target a specific group is not consistent with helping widest range of people and supporting whole economy.
3.44pm BST
15:44
Lord Hollick, the chair, asks about the prime minister’s concerns about the effect of QE and those who have lost out, and what the Bank could do to help.
Carney says since QE, jobs have been created, GDP has grown. That is not due to QE, but the stance has helped the UK economy during a difficult period.
Different groups will benefit in different ways. Between 2009 and 2016, most have benefited, although some more than others.
We do recognise those who rely on savings have seen lower returns.
3.41pm BST
15:41
Carney says the Bank’s independence has stood the test of time.
If it was called into question he would expect to see a risk premium on UK assets, particularly the currency, gilts and inflation expectations.
He said markets should have no reason to expect that [risk premium]. There is not a debate in parliament to change remit.
If the bank’s goal or remit was adjusted, the MPC would discharge that remit.
He said comments by individual politicians on policy would have no effect on how it discharges its responsibility.
Updated
at 3.48pm BST
3.39pm BST
15:39
Mark Carney is now beginning his testimony and is talking about monetary policy.
He says monetary policy has been overburdened, it is the principal if not sole vehicle to provide stimulus to the UK. He welcomes the government is signalling a resetting of the balance between monetary, fiscal and structural policy.
3.30pm BST
15:30
Sterling today pic.twitter.com/jxQHSrmnQk
3.25pm BST
15:25
Sterling continues to fall ahead of Mark Carney’s testimony shortly.
It has fallen as low as $1.2082, its lowest since the flash crash earlier this month, and while the strength of the dollar and the uncertainty about what Carney will say are factors, comments from chancellor Philip Hammond earlier may also be helping to push sterling lower. Connor Campbell, financial analyst at Spreadex, said:
Sterling’s renewed slide seems to have stemmed from comments made by Philip Hammond, who not only warned that EU leaders may focus on political rather than economic issues when discussing the Brexit, but also that, when asked about the possibility of more QE, pointed out that no quantitative easing request has ever been rejected. This seems to have spooked the pound, which had actually been on a decent run of form in the past few trading sessions, and that is before Mark Carney gives his latest Brexit update in front of the House of Lords later today.
The return of the pound’s perilous trading was good news for the FTSE. The UK index had been lacking a certain spark in the last few days; now it finds itself 50 points higher, firmly above 7000 and not too far away from its all-time peak.
3.17pm BST
15:17
The weak US consumer confidence figures could pose a problem for Federal Reserve chair Janet Yellen. Mike Read, co-founder of trading network Pelican, said:
Consumers in the US could be forgiven for harbouring slight trepidations about the future, amid a controversial presidential campaign and global economic uncertainty, but Fed Chair Janet Yellen will be concerned to see the first signs of this mounting pessimism taking effect.
Observers have long earmarked December as when the Fed will raise rates again, but 2016 has been a year of surprises and many traders may now be getting cold feet at the prospect of Yellen holding off until the new year.
Paul Sirani, Chief Market Analyst at Xtrade, still thinks a December rise is on the cards:
Consumer confidence rose in September to its highest level in nine years, but that positivity has proven short-lived for Fed Chair Janet Yellen following a worse than expected October reading.
Although the U.S. economy is performing well on the whole, Yellen has been singled out for criticism by presidential candidate Donald Trump, who claims she is keeping interest rates low for political reasons.
And it seems highly unlikely that she will pull the trigger before the Presidential race in November, with a December rise more likely.
3.12pm BST
15:12
US consumer confidence declines
The US presidential election has dented consumer confidence, according to a new survey.
The University of Michigan index of consumer sentiment fell by 3.6% month on month to 87.9. Year on year the fall was 2.3%. This was the lowest level since last September and the second lowest in the past two years. The survey’s chief economist Richard Curtin said:
It is likely that the uncertainty surrounding the presidential election had a negative impact, especially among lower income consumers, and without that added uncertainty, the confidence measures may not have weakened. Prospects for renewed gains, other than a relief rally following the election results, would require somewhat larger wage increases and continued job growth as well as the maintenance of low inflation.
Updated
at 3.14pm BST