Carney defends bank’s Brexit position
Bank of England governor grilled by British Parliament over ‘exaggerated’ warnings
Mark Carney stood by the actions of the Bank of England around the Brexit vote as his testimony before Parliament quickly turned into a grilling by his most vocal critic.
“In light of all the events since the referendum, since the evening of the 23rd, I’m absolutely serene” about the judgments taken by bank officials including the Monetary Policy Committee, the governor told British MPs, including Jacob ReesMogg, who took the lead in questioning the Canadian.
The Treasury Committee chair, Andrew Tyrie, opened the session on Wednesday with an unexpectedly immediate focus on pro-Brexit ReesMogg’s criticisms of Carney, including the allegation that he had exaggerated his warnings before the U.K.’s vote to exit the European Union. The governor testified to Parliament in London for the first time since the Bank of England said Britain’s decision had “markedly” worsened the outlook.
“We’ll see when we get all the data in but broad-brush, is growth running about half as much as it was prior to the referendum? That’s probably about right, given what we know right now,” Carney said. “So we expected some bounce-back, there’s been a bit more, but we’re keeping it in perspective.”
While initial data suggest the economy remained resilient after the June referendum, the Office for National Statistics won’t publish its first take on third-quarter growth until the end of October.
Defending the bank’s decisionmaking before and after the referendum, Carney said he was “comfortable” with “the judgment of this committee — all individuals and the committee collectively — that the referendum represented a risk to monetary policy, in other words to the stance of monetary policy.”
Carney has frequently clashed with Rees-Mogg. The member of Parliament and founder of investment firm Somerset Capital Management LLP said in an interview this week that while he did not wish to be the governor’s “arch critic,” the bank chief has often undermined his institution’s impartiality, and had acted to boost stimulus without sufficient evidence.
The questions from politicians, which Carney characterized as occasionally reaching “deeply into the counterfactual,” largely scrutinized the stimulus unveiled by the MPC in August, and whether it acted too swiftly or did too much.
Other Bank of England officials appeared alongside the governor, including Jon Cunliffe, Gertjan Vlieghe — and Kristin Forbes, who voted against parts of the stimulus plan. All provided written testimony.
Cunliffe stated that while some data suggest the impact from Brexit is less than feared, he would vote for a further rate cut if the economy evolves as the central bank forecasts. Vlieghe said the size and composition of the bank’s stimulus package introduced last month will be adjusted in line with how the economy is evolving.
By contrast, Forbes said she would be less likely to support more easing if demand doesn’t weaken as much as the bank’s forecast, if supply weakens more than expected, or if sterling’s depreciation continues.
Carney was questioned by Tyrie about the bank’s reach into political areas that might in the past have been regarded as beyond its remit, and his communications with the Chancellor of the Exchequer Philip Hammond around the time of the August decision.
Lawmakers also focused on whether banks are fully passing on the rate cut to customers, with Carney stating he is “highly confident” about the situation.