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/2017/oct/17/uk-inflation-wage-squeeze-mark-carney-bank-of-england-live

The article has changed 17 times. There is an RSS feed of changes available.

Version 6 Version 7
Bank of England's Mark Carney says inflation hasn't peaked yet after hitting 3% today - business live Bank of England's Mark Carney says inflation hasn't peaked yet after hitting 3% today - business live
(35 minutes later)
12.59pm BST
12:59
Treasury hits back at OECD over Brexit
Breaking away from Mark Carney (and inflation), the Treasury has slapped down the OECD after it suggested that Britain could stay in the European Union.
The Paris-based think tank argued this morning that Britain’s economy would get a boost if it chose not to follow through with Brexit.
In its annual assessment of the UK, the OECD predicted that growth would slow in 2018 year and business investment fall.
It also warned that a hard Brexit would “would hurt trading relationships and reduce long-term growth”.
But there would be a “significant” boost if the Brexit vote was reversed, perhaps through a second referendum, it suggested.
In response, the Treasury has insisted that the public won’t get a chance to change last June’s referendum result:
‘We are working to achieve the best deal with the EU that protects jobs and the economy. We aim to agree a Free Trade Agreement that is comprehensive and ambitious. Our £23 billion National Productivity Investment Fund which will improve our country’s infrastructure, increase research and development and build more houses.
We are leaving the EU and there will not be a second referendum.’
The OECD’s report was presented to the press in London this morning, but chancellor Philip Hammond didn’t hang around long enough to take questions....
Amazing moment when, after introducing the OECD to outline their bleak Brexit forecast, Hammond legs it before press can ask any questions pic.twitter.com/i6CMVwMnmI
12.52pm BST
12:52
Q: Should fiscal policy be taking more of the strain to help the UK economy?
Unsurprisingly, Mark Carney won’t be lured into commenting on tax and spending policies. We take fiscal policy as given, he insists, it’s not for us to advise the government.
And on house prices, he says the housing market faces “structural problems” (ie, we’re not building enough new homes) but argues that prices aren’t in a bubble (reminder, they rose by 5% per year in August).
He says the government’s Help to Buy hasn’t had a major impact on the market, either in terms of prices or stimulating a lot of new builds.
12.33pm BST
12:33
The pound has dropped by half a cent against the US dollar since Mark Carney’s testimony began.
Sterling may be suffering from the governor’s warnings about a no-deal Brexit
The pound is falling while Mark Carney is talking https://t.co/8fp0TNvHFN pic.twitter.com/MUNzvV0Trl
12.32pm BST
12:32
Q: Does the Bank of England have a clue about why UK productivity is so weak?
Carney says he does have a clue yes...and after more prodding from the committee he cites weak business investment and the wider impact of economic uncertainty.
John Mann extra deadpan at the Treasury Committee today. Here he is asking if Carney "has a clue" about why productivity is so low pic.twitter.com/Ig0CSFx5E7
12.26pm BST
12:26
Q: The UK’s debt burden is growing, thanks to consumer credit products such as PCPs used to buy new cars. When will the bubble blow up?
Carney argues that auto finance is not as serious as some claim.
If someone walks away from a PCP plan then the debt falls on the car vendor - or in many cases the manufacturer of the car.
He says banks are well-capitalised to handle a rise in bad debts.
12.23pm BST12.23pm BST
12:2312:23
Q: When must a transition deal be agreed, before firms take matters into their own hands and trigger their contingency plans?Q: When must a transition deal be agreed, before firms take matters into their own hands and trigger their contingency plans?
Carney won’t commit to a fixed date, but says the issue is particularly urgent for the City.Carney won’t commit to a fixed date, but says the issue is particularly urgent for the City.
Transition deal needed by Q1 for financial sector, Carney says, for other sectors 'there is a bit of a lag'. So urgency greatest at banksTransition deal needed by Q1 for financial sector, Carney says, for other sectors 'there is a bit of a lag'. So urgency greatest at banks
12.19pm BST12.19pm BST
12:1912:19
Carney: Businesses are losing faith in smooth BrexitCarney: Businesses are losing faith in smooth Brexit
Q: How have businesses and consumers’ attitude to Brexit changed?Q: How have businesses and consumers’ attitude to Brexit changed?
Mark Carney indicates that UK firms have become “less confident about a smooth transition” and less confident about the end state of Brexit.Mark Carney indicates that UK firms have become “less confident about a smooth transition” and less confident about the end state of Brexit.
Households are less worried, he says,Households are less worried, he says,
At present, household expectations are broadly consistent with a smooth outcome to a future arrangement.At present, household expectations are broadly consistent with a smooth outcome to a future arrangement.
But consumer confidence has fallen, partly due to lower real incomes (due to rising inflation).But consumer confidence has fallen, partly due to lower real incomes (due to rising inflation).
Carney adds that financial markets are the most concerned - they have already priced in a significant adjustment to the UK’s future prospects, and they may have to ‘mark up’ the UK’s future performance [if Brexit goes better than some fear].Carney adds that financial markets are the most concerned - they have already priced in a significant adjustment to the UK’s future prospects, and they may have to ‘mark up’ the UK’s future performance [if Brexit goes better than some fear].
UpdatedUpdated
at 12.20pm BSTat 12.20pm BST
12.10pm BST12.10pm BST
12:1012:10
Q: What preparations are you making for Brexit?Q: What preparations are you making for Brexit?
Carney says the Bank of England has looked at worse-case scenarios, and what we can do to mitigate those risks.Carney says the Bank of England has looked at worse-case scenarios, and what we can do to mitigate those risks.
That includes making sure that banks are sufficiently capitalised to handle a very bad outcome.That includes making sure that banks are sufficiently capitalised to handle a very bad outcome.
On the upside, the Bank could raise its growth forecasts if Britain agrees a “full, comprehensive, ambitious arrangement” with the rest of the EU.On the upside, the Bank could raise its growth forecasts if Britain agrees a “full, comprehensive, ambitious arrangement” with the rest of the EU.
.@catmckinnell asking about the basis of @bankofengland forecasting. Mark Carney: we have looked at worst case scenarios as well as the best pic.twitter.com/AZtaeduLEA.@catmckinnell asking about the basis of @bankofengland forecasting. Mark Carney: we have looked at worst case scenarios as well as the best pic.twitter.com/AZtaeduLEA
UpdatedUpdated
at 12.11pm BSTat 12.11pm BST
12.06pm BST12.06pm BST
12:0612:06
Carney: Need Brexit solutions on derivative contracts, insurance, data...Carney: Need Brexit solutions on derivative contracts, insurance, data...
The Treasury committee are probing Mark Carney about how the trillions worth of derivatives contracts between the UK and other EU country members will be handled after Brexit.The Treasury committee are probing Mark Carney about how the trillions worth of derivatives contracts between the UK and other EU country members will be handled after Brexit.
Mark Carney says this cannot be resolved if Britain crashes out without a deal.Mark Carney says this cannot be resolved if Britain crashes out without a deal.
Q: Is a two-year transition period enough to resolve this problem?Q: Is a two-year transition period enough to resolve this problem?
Carney says that the best solution would be legislation that would “grandfather those contracts”, so that they could continue to be honoured after Brexit.Carney says that the best solution would be legislation that would “grandfather those contracts”, so that they could continue to be honoured after Brexit.
He also cites cross-border insurance (European companies and individuals who have taken out insurance from UK entities) and cross-border data concerns.He also cites cross-border insurance (European companies and individuals who have taken out insurance from UK entities) and cross-border data concerns.
And...he repeats his argument that a hard Brexit would hurt Europe more than the UK on these issues.And...he repeats his argument that a hard Brexit would hurt Europe more than the UK on these issues.
There’s more data that is relevant to the EU in the UK than vice versa...There’s more data that is relevant to the EU in the UK than vice versa...
These issues are bigger for Europe than they are for us, but they’re material for us.These issues are bigger for Europe than they are for us, but they’re material for us.
11.59am BST11.59am BST
11:5911:59
Bang on cue, Mark Carney argues that a ‘no-deal’ Brexit poses a threat to Europe’s financial stability.Bang on cue, Mark Carney argues that a ‘no-deal’ Brexit poses a threat to Europe’s financial stability.
He tells the Treasury committee that Europe would be ‘short of financial services capacity’ in the short term, if Britain leaves the EU without a deal.He tells the Treasury committee that Europe would be ‘short of financial services capacity’ in the short term, if Britain leaves the EU without a deal.
The entire economic impacts are greater for the UK, he says, but the financial stability impact is greater for the EU in the short term.The entire economic impacts are greater for the UK, he says, but the financial stability impact is greater for the EU in the short term.
11.55am BST
11:55
Breaking: Britain faces long-term decline unless it secures “the closest possible economic relationship” with the European Union after Brexit.
That’s according to the Organisation for Economic Cooperation & Development (OECD), in its annual healthcheck on the UK economy.
More here:
11.50am BST
11:50
Carney argues that Britain and the EU will agree a transition deal, as avoiding a hard Brexit will be in everyone’s interests.
Carney says Uk needs a transition and Eu will agree. "There will ultimately be a transition... a transition agrmt is in everyone's interest"
There's no unilateral (i.e. no deal) solution to fixing 40,000 derivatives contracts that will be undeliverable after Brexit, says Carney
MArk Carney: BoE done preparations for "hard exit without any transition period" but much less in EU and its firms - on derivatives
11.47am BST
11:47
Carney: EU banks aren't preparing for hard Brexit
Carney is asked about concerns that some banks aren’t ready for Britain’s departure from the EU in 2019.
He replies that European-based institutions have done much less preparation than UK banks for the possibility of a hard exit from the EU without any transition deal.
So we’re doing all those preparations for that. There has been much less of that done in the European Union, including by the member firms.
11.44am BST
11:44
Q: What would happen if the City of London’s euro clearing market moved abroad after Brexit?
Carney warns that Europe’s real economy would suffer higher costs if the euro clearing market was fragmented
[currently, trillions of pounds, euros, dollars and yen-based derivatives contracts are settled in London, under a system of clearing houses set up to avoid a repeat of the financial crisis]
Q: So are you lobbying behind the scenes for talks on this issue to begin soon?
Carney says the Bank of England would like the UK to have the go-ahead to start talks, with the BoE’s assistance when needed.
And he insists that breaking up the derivatives market would mean that European car makers and pension funds, for example, would pay more for financial transactions.
11.37am BST
11:37
Carney also points out that the Bank of England is already trying to stimulate the economy:
BOE's Carney: UK monetary policy is stimulative, fiscal policy is restrictive and UK faces a variety of headwinds. $GBP $Brexit.
11.36am BST
11:36
11.34am BST
11:34
Q: With interest rates at just 0.25%, the UK doesn’t have much room to cut if there is a recession. Wouldn’t it be wise to raise borrowing costs to give the Bank more ammunition when needed?
Carney isn’t at all convinced that this is a good idea. He explains to the committee that the Bank’s job is to keep inflation at 2% in the medium term. Raising rates today so you can cut them tomorrow wouldn’t really fit with that remit.
As Carney puts it:
Building a war chest in interest rate terms for a potential future shock, isn’t staying on point in terms of the inflation target, nor is it appropriate or necessary given that policy can move quite nimbly if required.
11.31am BST
11:31
Carney signals importance of UK-EU trade deal
Q: Are you concerned that the UK’s net international investment position has been revised down by £490bn (as reported by the Daily Telegraph yesterday)?
Carney says that the stock of UK assets, as opposed to the flows, is quite healthy.
He points out that Britain still owns a lot of assets in the rest of the world (but not as much as previously thought). And the fall in the pound actually improves that position.
The UK owes a lot in sterling, and owns a lot in foreign currency assets.
With the depreciation [of the pound] you get a positive move.
Carney also warns that the “sustainable level” for Britain’s current account deficit (which is running a hefty deficit) will ultimately depend on the future trade relationship with Europe.
11.24am BST
11:24
Carney: Inflation likely to keep rising, thanks to weak pound
Mark Carney, governor of the Bank of England, is testifying to the Treasury Committee now.
It’s being streamed live, here.
Q: Inflation has risen to 3% - only 0.1% away from the level when you must write a letter to the chancellor explaining why you have missed your target. Do you expect to write a letter soon?
Carney says it is “more likely than not” that he will write to Philip Hammond in the next few months to explain why inflation is more than one percentage point away from 2%.
He says the fall in the pound since the Brexit vote means inflation is likely to rise over 3% “in the coming weeks”.
He reminds the committee that the Bank of England signalled prior to the referendum that the pound would be hit by a vote to leave the EU.
We expected sterling to fall sharply. It did. That passes through to prices....
The sole reason that inflation has gone up as much as it has is the depreciation of sterling.
11.22am BST
11:22
Sign up to our email
Guardian Business has launched a daily email.
Besides the key news headlines that you’d expect, there’s an at-a-glance agenda of the day’s main events, insightful opinion pieces and a quality feature to sink your teeth into each day.
For your morning shot of financial news, sign up here: