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/2019/jun/26/oil-and-bitcoin-rally-as-middle-east-tensions-drive-markets-business-live

The article has changed 14 times. There is an RSS feed of changes available.

Version 6 Version 7
Bank of England warns 'no-deal' Brexit fears have risen - business live Bank of England warns 'no-deal' Brexit fears have risen - business live
(30 minutes later)
Q: Young people are growing up in an era where interest rates have been extremely low for a decade - isn’t that a problem for the future?
Umbrella’s don’t cause rain, shoots back Mark Carney (quoting his MPC colleague Gertjan Vlieghe)
There are structural reasons why borrowing costs are so low - central banks are providing support to help economies. But yes, there are macro-prudential risks from such low interest rates, Carney says.
Q: Back in 2014, you told the committee that monetary policy was at “extraordinary, if not emergency” settings. Would you agree that it still is?
Carney does not -- even though interest rates (0.75%) are barely higher than five years ago (0.5%).
He argues that ‘equilibrium’ interest rates (the point where you’re neither stimulating nor strangling the economy) are lower than in 2014. So borrowing costs today are ‘accommodative’, but not extraordinarily so, the governor insists.
Mark Carney warns that “crystallising” businesses’ concerns over Brexit, by plunging out of the EU without a deal, would cause economic damage.
It would lead to some ‘capital scrapping’ as firms canned equipment, which would also hurt skilled workers, he adds.
Back in Westminster, Mark Carney has warned MPs that pay growth will probably slow this summer - having clawed its way up to 3.5% per year.
He says the ‘tightness in the labour market’ has pushed earnings up recently, but Britain has still suffered the worst decade for real pay growth since the 1850s.
George Osborne never managed to balance the books as UK chancellor, and he’s not doing much better following his switch to journalism.
Osborne’s Evening Standard lost more than £11m before tax last year, but did achieve a 2% rise in revenues in a tough market.
Evening Standard reports £11.5m loss amid ad struggles
Jack Maidment of Mail Online suspects that Mark Carney and Boris Johnson aren’t poles apart on Gatt 24, following the governor’s comments earlier.Jack Maidment of Mail Online suspects that Mark Carney and Boris Johnson aren’t poles apart on Gatt 24, following the governor’s comments earlier.
Seems like Mark Carney and Boris Johnson are actually in the same place on GATT. Mr Johnson yesterday talked about getting an 'agreement' to secure standstill. Mr Carney just told MPs: 'There needs to be an agreement and I believe that was Plan B as described yesterday.'Seems like Mark Carney and Boris Johnson are actually in the same place on GATT. Mr Johnson yesterday talked about getting an 'agreement' to secure standstill. Mr Carney just told MPs: 'There needs to be an agreement and I believe that was Plan B as described yesterday.'
The issue, though, is whether the EU would go along with Boris’s Plan B, if it didn’t provide a solution to the Irish border question, or settle Britain’s outstanding financial liabilities....The issue, though, is whether the EU would go along with Boris’s Plan B, if it didn’t provide a solution to the Irish border question, or settle Britain’s outstanding financial liabilities....
Deputy governor Sir Jon Cunliffe has warned the committee that the international economy is providing less support to the UK than in 2018.Deputy governor Sir Jon Cunliffe has warned the committee that the international economy is providing less support to the UK than in 2018.
Q: Don’t we need to conclude Brexit by Halloween, and end this nightmare, one way or another, asks Brexiteer MP Charlie Elphicke.Q: Don’t we need to conclude Brexit by Halloween, and end this nightmare, one way or another, asks Brexiteer MP Charlie Elphicke.
Mark Carney does his best impression of an Oxbridge don, telling the committee dryly that:Mark Carney does his best impression of an Oxbridge don, telling the committee dryly that:
There’s a reason that that 40-plus trade deals stuck between advanced economies in the last quarter century have always had a transition from the status quo to the new arrangement....There’s a reason that that 40-plus trade deals stuck between advanced economies in the last quarter century have always had a transition from the status quo to the new arrangement....
I would underscore that it is highly desirable to give businesses enough time to adjust to the new reality.I would underscore that it is highly desirable to give businesses enough time to adjust to the new reality.
Of course, it also matters what that new situation is, adds MPC member Silvana Tenreyro.Of course, it also matters what that new situation is, adds MPC member Silvana Tenreyro.
Worryingly, Mark Carney doesn’t expect the weak business investment to recover soon. Survey data suggests it was weak in the current quarter (April-June).Worryingly, Mark Carney doesn’t expect the weak business investment to recover soon. Survey data suggests it was weak in the current quarter (April-June).
MPC member Michael Saunders chimes in, reiterating that market fears of a no-deal Brexit have risen.MPC member Michael Saunders chimes in, reiterating that market fears of a no-deal Brexit have risen.
The outlook for the economy would be very different now (ie better), if we knew now that we’d see a smooth Brexit, rather than face rolling deadlines and uncertainty, Saunders adds.The outlook for the economy would be very different now (ie better), if we knew now that we’d see a smooth Brexit, rather than face rolling deadlines and uncertainty, Saunders adds.
Mark Carney adds that the housing market has suffered from Brexit uncertainty, as the deadlines for Britain’s departure have been pushed back.
[prices in London and the South East have been falling for several months]
Q: Isn’t it “unreal” for the BoE to still be assuming a smooth Brexit in its forecasts, then?
Carney replies that the markets don’t believe no-deal is the most likely outlook - it’s not the official policy of the government, or either Boris Johnson or Jeremy Hunt.
But the Bank is working constantly on its no-deal preparations, in case.
Q: Do you think the risk of a no-deal Brexit is growing?
Carney turns the question deftly back onto the Treasury committee -- pointing out that it’s the government’s job to plot the path forwards, and parliament’s job to approve it or not.
There has been a “notable increase” in market expectations of no-deal, he adds.
This uncertainty is hurting business investment, and hurting the UK’s short-term economic performance.
Deputy governor Sir Jon Cunliffe weighs in too -- telling MPs that “we look to you”. The BoE is only a central bank, after all....
Q: The Westminster Village have been frantically googling “Gatt 24” (after Boris Johnson suggested it could be used to guarantee free trade with the EU). You have suggested otherwise....
[Reminder for any MPs baffled by Google: Gatt 24 allows tariff-free trade for up to 10 years while a permanent trade agreement is negotiated].
Mark Carney explains that the UK cannot ‘unilaterally’ used Gatt 24 - there has to be an agreement in place too. If other WTO members agree that both are sides working towards a free trade deal, then tariff barriers can be lowered.
The governor then explains that you can’t have ‘no deal and Gatt 24’, joking that it may all come down to symantics -- but as a Canadian, he understands that ‘agreement’ means ‘deal’ in English.
Q: So Gatt 24 can’t apply in a no-deal situation?
There has to be an agreement, yes, Carney confirms. Not necessarily the Withdrawal Agreement, but something.
Carney says on the nerdy sounding GATT 24 there needs to be AN agreement for the UK to continue trading with no tariffs -- you cannot have no-deal: "an agreement is a form of deal"
"Can you have no deal and use GATT XXIV?" asks Mark Carney.The answer is no, unless there is a credible intention to move to an FTA with the EU, Carney says.
Q: Is that Bank of England worried by Donald Trump’s attacks on the Federal Reserve (demanding interest rate cuts)?
Mark Carney explains that central bank independence is important.
He reassures the committee that “monetary policy hasn’t been compromised in the UK” (although I do remember some criticism of the BoE by Theresa May in 2016).
He adds that he isn’t worried that the Fed will be knocked off course from pursuing low inflation and full employment, saying:
I have full confidence that the Federal Reserve will conduct a policy to achieve their dual mandate, and that the timing and extent of any policy changes will be determined by how they think they can achieve that mandate.
Q: At the May inflation report, governor, you said that global trade tensions have eased? Does that still hold true?
It held true for about 48 hours, Mark Carney grins, before Donald Trump tweeted he was hiking tariffs on Chinese imports.
Q: Has the threat to economic growth from a trade war increased?
Deputy governor Sir Jon Cunliffe agrees that tensions have increased, with America also threatening Mexico with tariffs and targeting European car sales.
Markets are more sensitive to trade developments, Cunliffe says, warning that there are now “more ingredients” for a full-blown trade war.
Q: What advice do you have for your successor, Mr Carney?
Carney (who is due to leave the Bank next January) says being governor is an “honour and a privilege”. It’s also a unique role, as the Bank is responsible for financial stability as well as monetary policy.
It requires a particular background and set of skills, Carney points out.
Q: If Britain’s next prime minister decides that leaving the EU with a deal is impossible, your next inflation report will look very different than the May one....
Carney replies that this isn’t the Plan A of either candidate, but yes, in that scenario the forecasts will change.
MPC policymaker Michael Saunders tells the committee that the UK economy could do “a little better” than the Bank forecasts, if Britain leaves the EU smoothly.
In that scenario, he argues that interest rate rises will be needed.
#Carney tells Treasury Select Committee that #BOE response in #interest rates not automatic if "no deal" #Brexit. Says in his view it is more likely that #BankofEngland would provide stimulus than tighten policy after "no deal"
Q: But what if the Bank of England is wrong, and Britain crashes out of the EU without a deal?
We would change our forecasts, Mark Carney replies.
He argues that it’s not “automatic” whether the Bank would raise or lower interest rates, but several policymakers (including Carney) believe some stimulus would be needed.
That’s a hint that interest rates could be cut, to protect the economy, in a no-deal situation.