Bet­ter just won’t cut it for BoE gover­nor

The Star Early Edition - - BUSINESS REPORT - Bloomberg

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

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