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Mark Carney: central banks not to blame for rising inequality Mark Carney: central banks not to blame for rising inequality
(35 minutes later)
12.24pm GMT
12:24
Andrew Tyrie takes Carney back to the slump in sterling since the Brexit vote, and tries to get him to admit that a weak pound is a good thing.
Q: Was the fall in the exchange rate welcome?
It was necessary, Carney replies. The purchasing power of the currency has gone down by 20%, as part of the process of adjusting Britain’s (whopping) current account deficit.
(A better option would have been a surge in domestic productivity, of course, to drive up exports, but one can only dream....)
Q: OK, but was the scale of the correction welcome?
Future events will decide that, says Carney.
Tyrie then reads out a quote from former BoE governor Mervyn King, who said recently that the fall in sterling was indeed welcome.
Q: Do you welcome this intervention from your predecessor?
I’m aways keen to hear what Lord King has to say, straight-bats Carney, joking that his intervention was “unnecessary but welcome”.
And he promises to keep a vow of silence once he leaves the BoE in June 2019.
Economics professor Tony Yates thinks Carney should have batted questions about the weak pound out of the park:
Carney ought to say: given the revision down in our expected future income, and the increased riskiness of the UK, fall in £ was inevitable
And to have fought against it with monetary policy would have triggered a recession. That's the answer to Tyrie's question.
Updated
at 12.25pm GMT
12.20pm GMT
12:20
Mark Carney hands out a brief economics lesson, insisting that the relationship between the money supply and inflation is ‘non-existant’.
Some of the MPs look unconvinced; maybe remembering Margaret Thatcher’s zeal for monetarism (which encouraged her government to hike interest rates and trigger the deep recession of the early 80s).
This theory may have won a Nobel Prize [for Milton Friedman], Carney says, but economics moves on.
12.05pm GMT
12:05
Carney says there’s no ‘precise number’ that shows the limit of the Bank’s tolerance for higher inflation (so no new forward guidance today!).
It all depends why inflation is moving - including whether the public’s inflation expectations have risen.
He says that many retailers took our hedges against a falling pound, to protect them for six or 12 months, and they are trying to cut costs to limit future price rises.
11.51am GMT11.51am GMT
11:5111:51
Carney insists that inflation is going to rise in the months ahead, as the weaker pound pushes up the price of imported goods. Carney says that inflation in October was lower than expected (as we covered this morning) mainly due to short-term effects in the clothing market.
But... he insists that inflation is going to rise in the months ahead, as the weaker pound pushes up the price of imported goods.
Mark Carney, asked by @RachelReevesMP why falling £ & rising import prices weren't yet feeding into much higher inflation: "It's coming"Mark Carney, asked by @RachelReevesMP why falling £ & rising import prices weren't yet feeding into much higher inflation: "It's coming"
#Carney: inflation rises to 2% by mid 2017 due to weak Pound: 60% passes thru to producer prices over 6-9 mos, longer to hit consumer prices#Carney: inflation rises to 2% by mid 2017 due to weak Pound: 60% passes thru to producer prices over 6-9 mos, longer to hit consumer prices
Carney is talking about pass throughs from sterling to inflation by referencing toblerones. Well done everyone.Carney is talking about pass throughs from sterling to inflation by referencing toblerones. Well done everyone.
Updated
at 11.57am GMT
11.43am GMT11.43am GMT
11:4311:43
Boom! Mark Carney suggests that City firms could start executing plans to leave London in autumn 2017, if they are disappointed by the early shape of the government’s Brexit deal.Boom! Mark Carney suggests that City firms could start executing plans to leave London in autumn 2017, if they are disappointed by the early shape of the government’s Brexit deal.
He tells the committee:He tells the committee:
If the time to exit is measured in 18 months, or less, and the degree of exit is considerable, then a number of firms will take decisions.If the time to exit is measured in 18 months, or less, and the degree of exit is considerable, then a number of firms will take decisions.
CARNEY SAYS WHEN TIME TO EXIT EU IS 18 MTHS & IMPACT OF BREXIT IS CONSIDERABLE, THEN FINANCIAL SERVICES FIRMS MAY TRIGGER CONTINGENCY PLANSCARNEY SAYS WHEN TIME TO EXIT EU IS 18 MTHS & IMPACT OF BREXIT IS CONSIDERABLE, THEN FINANCIAL SERVICES FIRMS MAY TRIGGER CONTINGENCY PLANS
‘Degree of exit’ means hard, or soft Brexit -- ie, whether the financial services sector retains full access and membership of the single market.‘Degree of exit’ means hard, or soft Brexit -- ie, whether the financial services sector retains full access and membership of the single market.
11.37am GMT11.37am GMT
11:3711:37
Carney: Too early to trigger Brexit contingency plansCarney: Too early to trigger Brexit contingency plans
Q: What steps is Britain’s financial sector taking for Brexit?Q: What steps is Britain’s financial sector taking for Brexit?
Carney says that firms in the core of the financial sector, such as banks and insurance firms, are making contingency plans.Carney says that firms in the core of the financial sector, such as banks and insurance firms, are making contingency plans.
But “very few of them are actually implementing contingency plans”.But “very few of them are actually implementing contingency plans”.
And he urges business leaders to sit tight.And he urges business leaders to sit tight.
As they follow those plans, hard decisions will be taken.As they follow those plans, hard decisions will be taken.
But I would stress, to those firms, that it is very early days. So planning makes sense, action is in general precipitous.But I would stress, to those firms, that it is very early days. So planning makes sense, action is in general precipitous.
UpdatedUpdated
at 11.38am GMTat 11.38am GMT
11.33am GMT11.33am GMT
11:3311:33
“Our view is that it’s still early days [for Brexit]”, Mark Carney says.“Our view is that it’s still early days [for Brexit]”, Mark Carney says.
Article 50 hasn’t been triggered yet, and we don’t know if there will be a transition period afterwards.Article 50 hasn’t been triggered yet, and we don’t know if there will be a transition period afterwards.
11.30am GMT11.30am GMT
11:3011:30
Wes Streeting MP takes Mark Carney into the details of Brexit.Wes Streeting MP takes Mark Carney into the details of Brexit.
Carney says that the financial markets have taken a more downbeat view of Brexit than consumers.Carney says that the financial markets have taken a more downbeat view of Brexit than consumers.
The scale and direction of the pound’s decline shows that markets expect slower UK growth and a less open economy.The scale and direction of the pound’s decline shows that markets expect slower UK growth and a less open economy.
And UK firms are adjusting to Brexit faster than expected in August.And UK firms are adjusting to Brexit faster than expected in August.
Carney says:Carney says:
11.24am GMT11.24am GMT
11:2411:24
Sky News’s Ed Conway makes an important point -- until this morning, we didn’t know that former chancellor George Osborne had asked Mark Carney to serve three more years.Sky News’s Ed Conway makes an important point -- until this morning, we didn’t know that former chancellor George Osborne had asked Mark Carney to serve three more years.
Carney reveals @George_osborne asked him earlier this year to extend his term to a full eight yearsCarney reveals @George_osborne asked him earlier this year to extend his term to a full eight years
11.23am GMT11.23am GMT
11:2311:23
Carney: We're ready to help with BrexitCarney: We're ready to help with Brexit
John Mann: How can the Bank of England plan for Brexit when no-one knows what it will mean?John Mann: How can the Bank of England plan for Brexit when no-one knows what it will mean?
We certainly don’t know what the eventual shape of Brexit will be, agrees MPC member Michael Saunders.We certainly don’t know what the eventual shape of Brexit will be, agrees MPC member Michael Saunders.
Q: So how can you be doing your job if you’re not having regular updates from the government, and some indication over where Brexit is going?Q: So how can you be doing your job if you’re not having regular updates from the government, and some indication over where Brexit is going?
Carney suggsts there’s no reason to panic. This is “all to play for”, so we’ve drawn up a central forecast based on the likelihood of events.Carney suggsts there’s no reason to panic. This is “all to play for”, so we’ve drawn up a central forecast based on the likelihood of events.
And we are available for technocratic support to the government, if they need it.And we are available for technocratic support to the government, if they need it.
Mann then reveals that he’s polled his constituents about Brexit; most of them want immigration controls to be part of the discussion, but only a small minority want to leave the single market, so..Mann then reveals that he’s polled his constituents about Brexit; most of them want immigration controls to be part of the discussion, but only a small minority want to leave the single market, so..
Q: Surely you should be providing expert analysis of these options, and keeping us informed?Q: Surely you should be providing expert analysis of these options, and keeping us informed?
The proper role for the MPC is to make its forecasts, and identify material risks to that forecasts, Carney replies.The proper role for the MPC is to make its forecasts, and identify material risks to that forecasts, Carney replies.
11.14am GMT11.14am GMT
11:1411:14
John Mann MP now challenges Mark Carney over the composition of his monetary policy committee.John Mann MP now challenges Mark Carney over the composition of his monetary policy committee.
Q: Wouldn’t a trade union economist being some much-needed industry experience, to help the Bank understand the economy.Q: Wouldn’t a trade union economist being some much-needed industry experience, to help the Bank understand the economy.
Carney says its not up to him to advise the government about MPC appointments.Carney says its not up to him to advise the government about MPC appointments.
But he did meet with the TUC recently, so the Bank isn’t ignoring trade unions.But he did meet with the TUC recently, so the Bank isn’t ignoring trade unions.
11.12am GMT
11:12
Andrew Tyrie jabs at Carney, suggesting he’s uttering ‘Delphic’ words over forward guidance.
The guidance is that there isn’t any guidance, right?
Yes, says Carney. But it’s possible that a future Monetary Policy Committee could find themselves in a place where they might need forward guidance.
Tyrie tells Mark Carney central bankers are guilty of "Delphic utterances". "Your capacity to create a theology is boundless" 😇
(so the forward guidance is that there might be forward guidance one day)
11.05am GMT
11:05
Conservative MP Kit Malthouse asks Mark Carney to explain the position with forward guidance (the governor’s famous policy of pledging not to raise interest rates until the economy has reached a certain point).
Carney gives a long explanation of forward guidance (which began by not promising to raise rates until unemployment fell below 7%). He says these pledges helped to underpin confidence and support the economy.
But where is this forward guidance now, pleads Malthouse?
It’s very clear, it’s not that difficult, says Carney (showing a small flash of impatience as he flicks through the latest quarterly inflation report).
Look, it says here at the front that we now have a ‘neutral stance’ on interest rates. In other words, the next interest rate rise could be up or down.
#BOE Gov Mark #Carney confirms interest rates can now go up or down: "neutral bias: monetary policy is appropriate" https://t.co/DdIrd2Kc05
Malthouse still looks a bit baffled - but it’s not really his fault. The Bank’s policy is now to raise, or lower, rates depending on what the economy needs - which isn’t exactly rocket science.
10.53am GMT
10:53
Carney: Don't blame central banks for rising inequality
Tyrie mischievously turns Carney’s attention over the Atlantic, suggesting that Donald Trump and Theresa May share the same concerns over central banks.
Q: Trump has been “pretty critical of the Fed”, hasn’t he?
The president elect has voiced some views on central banks, Mark Carney replies. But the issues facing the Fed and the Bank of England are different, so it’s not a straight comparison.
And Carney then lets rip at critics who blame central bankers for everything:
It’s very important to distinguish between the stance of monetary policy and the reasons why global interest rates are low, the reasons why inequality has increased across major economics.
Those are caused by much more fundamental factors. And an excessive focus on monetary policy in many respects is a massive blame deflection exercise.
Mark Carney says those politicians complaining about low rates from central banks are engaged in a "massive blame deflection exercise"...
10.47am GMT
10:47
Q: Do you think that the fact that central banks are responsible for such a huge range of activities today puts you in a position where you are more vulnerable to criticism, such as over Brexit?
Carney plays this ball safely.
He says it’s “entirely appropriate and natural” that central banks face more accountability today, as they have much wider responsibilities than in the past.
Especially when monetary policy is playing such a big role in stimulating economies.
10.44am GMT
10:44
Q: Did Theresa May’s apparent criticism of central banks in her recent conference speech influence your decision to only serve another 12 months?
No, Carney replies.
10.37am GMT
10:37
Mark Carney denies that the uncertainty over his departure date has created uncertainty.
There are “far bigger issues’ in the UK economy, and the global economy, than my term lengths, he says.
There may be, concedes Andrew Tyrie.
There are, Carney insists!
10.35am GMT
10:35
Carney: I'm leaving in June 2019, whatever happens with Brexit
Mark Carney’s grilling at the Treasury Committee is underway.
Chairman Andrew Tyrie asks the Bank of England governor how much uncertainty has been caused by his decision to initially only serve five years, and then extend it by 12 months. Wouldn’t it be better to keep governors to fixed terms of eight years?
Carney says it is a great privilege and a great responsibility to serve at the Bank of England. He had planned to only do a five year term, but was then asked to do an extra three years.
Q: So you were asked to extend it to eight years, but only chose to add on 12 months?
Yes, says Carney.
Q: What happens if the process of triggering article 50 takes longer than expected, and isn’t complete by the end of June 2019 (when Carney’s six-year term ends)?
I have a family, Carney explains, and there are “reasonable limits” to how long he can be separated from them (the governor’s wife, Diane and their four daughters plan to return to Canada in 2018).
Carney says he added one year to his term “out of a sense of responsibility”
Theresa May has made it clear that she plans to trigger article 50 by March 2017, he says, so Britain should have left the EU by March 2019.
But he won’t speculate about hypothetical scenarios, and he doesn’t want his departure date to be seen as a ‘judgement’ on the Brexit timetable.
Tyrie won’t let this lie, demanding to know....
Q: Are you definitely, irrevocably, leaving the bank in 2019?
It sounds like you want to get rid of me, jokes Carney.
And then he insists that he will indeed leave the BoE on 30 June 2019.
Updated
at 10.44am GMT
10.20am GMT
10:20
While we wait for Mr Carney, there’s time to flag up that UK house prices rose by 7.7% in the 12 months to September.
That matches August’s reading, with houses in the south of England driving the market up.
UK house prices grew at a healthy 7.7%y/y clip in September. East of England led the way with 12.1%y/y growth while N. East at only 1.5%y/y. pic.twitter.com/LSet77CLtj
Richard Snook, senior economist at PwC, says there are signs that the market may be cooling....
“We now have three months of post-Brexit official housing figures, which show price growth remaining robust, but fewer properties changing hands. At the start of the year, we expected slower house price growth, but in fact it has shown impressive resilience: in the first three quarters of the year average annual house prices were up by around 8% across the UK compared to the same period last year.
“But high prices are causing some buyers to stay out of the market altogether. The ONS data show residential transactions in September were just 93,000, 11.3% lower than the previous year. This implies that underlying demand may be weakening as property becomes less and less affordable.”
10.14am GMT
10:14
Bank of England governor Mark Carney is due to give evidence to the Treasury Committee in parliament now, on the Bank’s latest quarterly inflation report.
There’s a livefeed here.
Updated
at 10.14am GMT
10.11am GMT
10:11
Newsflash from Brussels: the eurozone economy grew by 0.3% in the third quarter of this year, matching Q2’s growth rate.
Although Germany and France only grew by 0.2%, Italy expanded by 0.3% and the Netherlands and Spain both posted healthy growth of 0.7%.
Euro area GDP +0.3% in Q3 2016, +1.6% compared with Q3 2015 #Eurostat - https://t.co/IYKjKoK4hg pic.twitter.com/ELfGUzo4PN