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/2016/oct/25/mark-carney-brexit-bank-of-england-japanese-stock-market-dollar-business-live

The article has changed 4 times. There is an RSS feed of changes available.

Version 2 Version 3
Mark Carney answers questions at House of Lords – live Mark Carney defends Bank of England at House of Lords – as it happened
(35 minutes later)
5.57pm BST
17:57
Carney has now finished so here are some of the key points.
In the wake of criticisms from various politicians, he said investors would want a “risk premium” to buy UK assets if the Bank’s independence was questioned. But markets should not expect this to happen. It was up to the government to set a target for price stability which the Bank would then decide how to reach.
On his own future, he said it would be a personal decision as to when he would step down from the Bank and not related to politics.
Sterling’s recent slump had less to do with monetary policy, he said, and more to do with the announcement of the timetable for Article 50 and the market’s perception of how discussions on Brexit would unfold.
He said there were various contingency plans in place for banks to leave London if they saw fit.
On QE he expressed sympathy for savers who have been hit by the programme, but said the Bank was not slavishly relying on QE.
He defended the Bank’s purchase of corporate bonds, including McDonald’s.
On negative rates, he said there was something unnatural and a confidence effect.
Meanwhile the pound has recovered some ground after its earlier sudden slump, which was blamed variously on the strong dollar, comments from chancellor Philip Hammond suggesting more QE and nervousness ahead of Carney’s appearance at the House of Lords.
It is now down 0.3% at $1.2195 after falling as low as $1.2084 - its worst level since the flash crash earlier this month. Its recovery is partly due to Carney’s measured performance and his attempts to reassure on QE, his own future, and worries over the Bank’s independence.
With the slight recovery in the pound, the FTSE 100 has lost much of its earlier gains but still ended up 0.45% at 7017.64.
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.
5.43pm BST
17:43
Helena Smith
Over to Greece, and the White House has confirmed that president Barack Obama will be visiting the country in November in what officials hope will be the biggest push yet to secure debt relief for the country. Our correspondent Helena Smith reports.
Barely days after the race for the White House, the outgoing president will visit Athens on November 15 in what was described as a tour aimed at reaffirming support “for economic reforms that reduce inequality.”
The US president has voiced barely disguised frustration with austerity policies he has blamed for economic stagnation and slow growth in Europe. Greek officials in the leftist-led government are hoping Obama will push for debt forgiveness when he goes on to hold talks with the German chancellor Angela Merkel in Berlin so that the Greek economy, currently locked in its worst slump in modern times, can be put on the path to recovery.
The IMF, like Washington, both believe that with a debt load in excess of €300bn the Greek economy is unsustainable. Prime minister Alexis Tsipras has recently racheted up the rhetoric, saying a debt deal should be wrapped up by December when Athens completes a second review of the economy with international inspectors representing its bailout creditors at the EU and IMF. His appeals were rebuffed by both Merkel and her French counterpart when he met them on the sidelines of last week’s EU summit in Brussels. Berlin, the main provider of bailout funds to date, has argued that Greece’s problen is not one of debt but competitiveness.
5.40pm BST
17:40
Jill Treanor
Still with Brexit, and Ireland is making a pitch to provide a home for a key regultor. Jill Treanor writes:
It is not so long ago that European Banking Authority moved to new offices in London’s Canary Wharf. But the vote for Brexit means the regulator which oversees banks in the remaining 27 countries of the EU is likely to need a new home. Ireland has now made a formal pitch to take on the regulator, best known for conducting its stress tests on banks. Michael Noonan, minister of finance said: “While the UK continues to be a full member of the EU until the negotiations for their exit have been completed, preparations must be made for eventualities such as the relocation of certain European agencies such as the European Banking Authority. Ireland has a significant financial services sector, efficient transport links to other European capitals and the capacity to absorb the European Banking Authority’s re-location to Ireland. Our interest in hosting the EBA demonstrates the continued importance Ireland places in well regulated financial services. As a country with experience in providing links to banks and companies in the UK market, Ireland provides an ideal new home for the staff of the EBA.”
Ireland has made no secret of its ambitions to take any exiles from London’s financial services sector.
5.38pm BST
17:38
Lord Hollick ends by saying a question has been sent in during the proceedings by a pensioner who wants to know what he should invest his savings in.
Carney replies that when he can have the answer sent in, he will give a reply.
And with that, it’s over.
Updated
at 5.51pm BST
5.33pm BST
17:33
5.33pm BST
17:33
Question: Why are you opposed to negative interest rates? Do you feel comfortable with size of derivatives on bank bal sheets
Carney says on negative rates, uncomfortable with effect on bank balance sheets and lending possibly being tempered or reversed. In UK the building societies are an important part of system and they don’t have alternative supply of finance.
On top of that, there is something unnatural to negative rates to some people and there is a confidence effect.
In terms of derivatives, reforms put in place have substantially reduced risks.
Updated
at 5.52pm BST
5.29pm BST5.29pm BST
17:2917:29
Question: If MPC had known about fall in sterling in August would they have done same? When does depreciation start becoming serious? Question: If the MPC had known about fall in sterling in August would they have done same stimulus measures ? When does depreciation start becoming serious?
Carney says committee always takes into account exchange rate movements and the reasons, and its effect on inflation.Carney says committee always takes into account exchange rate movements and the reasons, and its effect on inflation.
Prior to referendum, the way we talked remained most appropriate - we have to balance supply, demand and exchange rate.Prior to referendum, the way we talked remained most appropriate - we have to balance supply, demand and exchange rate.
Since timing of Article 50 became clear, sterling has been influence by market perceptions of [future with EU].Since timing of Article 50 became clear, sterling has been influence by market perceptions of [future with EU].
If exchange rate has depreciated and UK supply capacity is weakened by Brexit, it will push up inflation.
Updated
at 5.52pm BST
5.26pm BST5.26pm BST
17:2617:26
Question: What is concerning central bankers at the moment other than Brexit?Question: What is concerning central bankers at the moment other than Brexit?
Carney says the balance of monetary, fiscal and structural policy, and that monetary policy has been overburdened. Fair bit of time needs to be spent on that.Carney says the balance of monetary, fiscal and structural policy, and that monetary policy has been overburdened. Fair bit of time needs to be spent on that.
In terms of biggest risk, China. It is going through a series of transitions, manufacturing to services, from bank based lending to market based finance, flexibility of exchange rate. They are all happening simultaneously. Chinese authorities have done an exemplary job in managing this, but there are challenges.In terms of biggest risk, China. It is going through a series of transitions, manufacturing to services, from bank based lending to market based finance, flexibility of exchange rate. They are all happening simultaneously. Chinese authorities have done an exemplary job in managing this, but there are challenges.
In recent years the pace of growth has been faster than the speed limit, effectively a product of debt through shadow banking sector. Challenge is to sustainably and safely decelerate the rate of growth.In recent years the pace of growth has been faster than the speed limit, effectively a product of debt through shadow banking sector. Challenge is to sustainably and safely decelerate the rate of growth.
5.19pm BST5.19pm BST
17:1917:19
Question: when will the recent fall in sterling affect inflation?Question: when will the recent fall in sterling affect inflation?
Carney says the recent uptick in inflation is the product of a few factors but not, net, sterling. Mainly energy prices and clothing prices.Carney says the recent uptick in inflation is the product of a few factors but not, net, sterling. Mainly energy prices and clothing prices.
Relatively quickly we will see the effects of the sterling depreciation. By the spring [inflation will be] 1.5% to 1.8% annualised with an important contribution [from currency].Relatively quickly we will see the effects of the sterling depreciation. By the spring [inflation will be] 1.5% to 1.8% annualised with an important contribution [from currency].
We do not have a target for the exchange rate. But it is a factor which influences the stance of monetary policy, and will take into account over next week as we make our policy decision.We do not have a target for the exchange rate. But it is a factor which influences the stance of monetary policy, and will take into account over next week as we make our policy decision.
4.52pm BST4.52pm BST
16:5216:52
Question: Given government can borrow at low rates and investing, shouldn’t they take advantage of that?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. 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 project 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.
Updated
at 5.36pm BST
4.50pm BST4.50pm BST
16:5016:50
Question: Is monetary policy now too loose and fiscal policy too tight?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.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.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 BST4.45pm BST
16:4516:45
Away from Carney and back to the pound’s slide. Neil Wilson, markets analyst at ETX Capital said: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.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.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 BST4.45pm BST
16:4516:45
Question: Is there too much uncertainty now for forward guidance to be useful?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.Carney says it is useful in certain circumstances, in the exit from unconventional policy.
4.38pm BST4.38pm BST
16:3816:38
Lamont: Why are you now buying corporate bonds?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.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.[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.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 BST
16:20
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 BST
16:14
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.
4.11pm BST
16:11
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 are discussions [to be held with the EU], it would be precipitate to make decisions [before then].
4.08pm BST
16:08
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.
4.07pm BST
16:07
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.
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.
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.
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.
[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.
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 BST
16:00
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.
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.
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 BST
15:56
Decision 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?
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.
Updated
at 4.16pm BST