Better just won’t cut it for BoE governor
FOR MARK Carney, better will not be good enough.
The Bank of England (BoE) governor, overseeing an economy recording solid expansion and accelerating inflation, would probably raise nearterm projections for both this week, according to economists.
At the same time, he might highlight potential longer-term threats from Brexit that may damp speculation about tighter policy. It is a delicate balancing act for Carney, who spent much of last year fending off accusations that he was being far too gloomy about the economy.
While inflation will breach the BoE’s 2 percent target within months, the Monetary Policy Committee indicated it was keeping its emphasis on supporting growth for now.
“On the face of it, the inflation forecast and the fairly resilient growth performance argues for a more hawkish message,” said Sam Hill, an economist at RBC Capital Markets. “But given the headwinds that are approaching related to Brexit, it’s likely the MPC will spend some time making clear just how much room they’ve got to look through a period of inflation being above target.”
Economists predicted the BoE would keep its key interest rate at 0.25 percent and leave the size of its quantitative-easing programme unchanged. Last August, officials announced a £60 billion (R1.02 trillion) expansion of their gilt-purchase plan, a round of bond buying that expires next month.
Last November, the BoE projected growth of 1.4 percent this year and 1.5percent next year, with inflation about 2.7 percent in both years. Since then, the pound has stopped falling and the economy has maintained its 0.6 percent pace of quarterly expansion.
Three months ago, Carney said the bank’s next rate move could be up or down. UK consumer-price growth rate jumped to 1.6percent last month, and some economists saw it reaching 3percent this year. – Bloomberg