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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)
1.39pm GMT
13:39
Mark Carney ends the meeting by returning to his theme that there is a “blame exercise” underway, with central banks being labelled as the only cause of problems in the economy today.
He says that only politicians can really tackle inequality - his job is to help create economic stability and stable inflation.
We’re going to have to run exeptionally loose monetary policy
We are going to continually make clear that we can’t make the structural changes that will drive productivity.
But he agrees it would be absolutely welcome to raise interest rates, when appropriate:
*CARNEY: IT WOULD BE WELCOME TO RAISE INTEREST RATES
1.33pm GMT
13:33
Carney: We shouldn't tighten policy now
And finally, Steve Baker tries to get himself swiftly dis-invited from the Bank of England Christmas party, by asking:
Q: Have you lost the plot?
MPC member Ian McCafferty denies it -- the bank acted on the best data possible after the Brexit vote, and have been responding to events first.
Baker clarifies that he’s actually quoting William Hague (former foreign secretary), who recently claimed that central bankers were pumping up a new bubble and keeping rates too low.
Q: You have explained that unemployment would be higher if interest rates rise, so aren’t you making “highly political decisions”?
No, Carney insists. We’re following our mandate (to maintain inflation around 2% in the medium term).
And he then suggests that there’s a dangerous theory that central bankers should thrown down a challenge to elected leaders:
I do not accept the line of thought that central banks should not focus on their remit. They should tighten policy in order to force governments to take tough decisions.
That’s straying from the mandate. That’s political.
Q: Won’t there be a huge crash when rates rise, having been left low for so long?
Deputy governor Minouche Shafik argues that the Bank doesn’t set the interest rate that the UK economy needs.
And there would be “very big economic costs” to pay if rates were raised now.
1.18pm GMT
13:18
Rees-Mogg asks whether the Bank’s latest (more optimistic) economic forecasts will affect economic growth, in the same way that Mark Carney’s statement immediately after the Brexit vote helped shore up confidence (in the bank’s view, anyway)
Tiptoeing carefully, Carney suggests that forecast changes don’t have as much impact on consumers as actual interest rate changes (or commitments to act).
Q: But if your forecasts are wrong, and are revised, that’s a problem?
Carney suggests that all forecasts are revised.
Q: Yes, but it’s hard to spot which part of the August forecast was right [the BoE slashed its 2017 growth forecast, and then revised it much higher in November].
Carney tries to stick to the big picture, saying that Britain is suffering a “slow motion slowdown” since the Brexit vote, not a sharp adjustment.
Q: So should you watch out for groupthink in future?
Carney says that the BoE’s forecasts were too pessimistic about consumer spending; people did not react badly to the Brexit vote. The lesson learned is around the ‘big turning point’, he says.
1.07pm GMT
13:07
High jinks likely at the Bank of England Christmas party
Finally, Jacob Rees-Mogg gets to question the Bank of England.
Rees-Mogg is one of Mark Carney’s toughest critics, and recently suggested the governor should resign for his comments before the Brexit vote.
Everyone leans forward to hear what zingers Rees-Mogg will send down,....
Q: I must start by thanking you, governor, for inviting me to the Bank of England Christmas Party, it’s very gracious, so thank you very much.
Well, it is the season, grins Carney.
Immediately, Steve Baker MP catches the governor’s eye - perhaps keen on some canapés and champers - and Carney finds himself inviting the whole committee along!
BREAKING: Mark Carney has invited arch nemesis Jacob Rees-Mogg to the Bank of England's Xmas party
Updated
at 1.24pm GMT
12.54pm GMT12.54pm GMT
12:5412:54
Mark Carney has challenged politicians to implement ‘major’ structural economic reforms.Mark Carney has challenged politicians to implement ‘major’ structural economic reforms.
Otherwise, we could be stuck with low interest rates for decades.Otherwise, we could be stuck with low interest rates for decades.
*CARNEY: LOW-RATE TRAP MAY PERSIST DECADES UNLESS MAJOR REFORMS*CARNEY: LOW-RATE TRAP MAY PERSIST DECADES UNLESS MAJOR REFORMS
BOE Gov #Carney: monetary policy is not "loose"; global equilibrium interest rates low & could be "trapped" here for decades without reformsBOE Gov #Carney: monetary policy is not "loose"; global equilibrium interest rates low & could be "trapped" here for decades without reforms
12.48pm GMT12.48pm GMT
12:4812:48
Mark Carney says that only 4% of companies with a pension deficit say that current low interest rates are causing a problem.Mark Carney says that only 4% of companies with a pension deficit say that current low interest rates are causing a problem.
Q: But you at the Bank of England have just boosted the contributions into your own final salary scheme, says Helen Goodman.Q: But you at the Bank of England have just boosted the contributions into your own final salary scheme, says Helen Goodman.
Carney doesn’t like this very much - he says “total compensation” has been level-pegging with the public sector.Carney doesn’t like this very much - he says “total compensation” has been level-pegging with the public sector.
12.40pm GMT12.40pm GMT
12:4012:40
Back in parliament, Helen Goodman MP challenges the Bank of England over its QE scheme.Back in parliament, Helen Goodman MP challenges the Bank of England over its QE scheme.
Q: By pushing down bond yields, you’ve damaged defined benefit pension schemes and forced them to put more money to cover deficits,Q: By pushing down bond yields, you’ve damaged defined benefit pension schemes and forced them to put more money to cover deficits,
Minouche Shafik says this only affects schemes that are already in deficit, and most private sector firms have moved away from offering these final salary schemes.Minouche Shafik says this only affects schemes that are already in deficit, and most private sector firms have moved away from offering these final salary schemes.
Goodman shoots back that firms aren’t stopping these schemes because people don’t like the security of final salary pension. They’re stopping them because they’re too expensive in the current financial environment.Goodman shoots back that firms aren’t stopping these schemes because people don’t like the security of final salary pension. They’re stopping them because they’re too expensive in the current financial environment.
And because people are living longer, Shafik replies.And because people are living longer, Shafik replies.
12.32pm GMT12.32pm GMT
12:3212:32
Breaking away from Mark Carney.... over in Greece, president Barack Obama has arrived in Athens.Breaking away from Mark Carney.... over in Greece, president Barack Obama has arrived in Athens.
Security is extra right in the Greek capital; there’s a complete lockdown, with protests banned, public transport stopped, schools closed down,.Security is extra right in the Greek capital; there’s a complete lockdown, with protests banned, public transport stopped, schools closed down,.
Some 5,000 local police and over 300 US security agents participating in what is an unprecedented security cordon thrown around the capital.Some 5,000 local police and over 300 US security agents participating in what is an unprecedented security cordon thrown around the capital.
A gun ship is plying the waters south of Athens, and there’s a drone flying overhead, says our correspondent Helena Smith.A gun ship is plying the waters south of Athens, and there’s a drone flying overhead, says our correspondent Helena Smith.
We’ll have a full report shortly. In the meantime, here’s how the day is playing out:We’ll have a full report shortly. In the meantime, here’s how the day is playing out:
Air Force One touches down in #Athens for #obama_athens visit(screen shot from ERT Pool via @AP Direct) pic.twitter.com/6zNUOXgBvOAir Force One touches down in #Athens for #obama_athens visit(screen shot from ERT Pool via @AP Direct) pic.twitter.com/6zNUOXgBvO
Obama arrives in Greece at start of his final foreign tour https://t.co/WrLutOiwcV pic.twitter.com/BmDsm6UpqCObama arrives in Greece at start of his final foreign tour https://t.co/WrLutOiwcV pic.twitter.com/BmDsm6UpqC
Happening now: Obama meets with Greece's president in Athens on his final foreign tour pic.twitter.com/ygETv07JFaHappening now: Obama meets with Greece's president in Athens on his final foreign tour pic.twitter.com/ygETv07JFa
Obama and Tsipras sit down pic.twitter.com/MUNHfto5RdObama and Tsipras sit down pic.twitter.com/MUNHfto5Rd
12.24pm GMT12.24pm GMT
12:2412:24
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.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?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.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....)(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?Q: OK, but was the scale of the correction welcome?
Future events will decide that, says Carney.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.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?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”.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.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: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 inevitableCarney 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.And to have fought against it with monetary policy would have triggered a recession. That's the answer to Tyrie's question.
UpdatedUpdated
at 12.25pm GMTat 12.25pm GMT
12.20pm GMT12.20pm GMT
12:2012:20
Mark Carney hands out a brief economics lesson, insisting that the relationship between the money supply and inflation is ‘non-existant’.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).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.This theory may have won a Nobel Prize [for Milton Friedman], Carney says, but economics moves on.
12.05pm GMT12.05pm GMT
12:0512:05
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!).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.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.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 says that inflation in October was lower than expected (as we covered this morning) mainly due to short-term effects in the clothing market.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.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.
UpdatedUpdated
at 11.57am GMTat 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.