March 11, 2014 / 9:42 AM / 3 years ago

HIGHLIGHTS-Bank of England's Carney, other policymakers speak in parliament

9 Min Read

LONDON, March 11 (Reuters) - Bank of England Governor Mark Carney and other top policymakers from the central bank are speaking in Britain's parliament.

Below are highlights from their comments in a hearing of the Treasury Committee in the House of Commons.

Governor Mark Carney:

On Scottish Currency Union Viability

"There is a wide range of factors which would determine viability and viability in a currency union, (it's) like being pregnant, you can't be half viable in a currency union."


"It is in part a product of the assessment of risk we have to prioritize and the arrangement - if this really comes to pass, there is, in terms of the timetable of the Scottish government, there is a period of time over which arrangements would be developed, that is the first point.

"The second point is that, as you are well aware, there is a referendum in September. There is a clear view of all the parties in Westminster on the possible arrangements after that referendum which (colours) the probability of the types of financial stability risk that we could face."

On Boe's Advice About Scottish Independence Risks

"If the circumstances were to come to pass that there were the prospect of a change to the monetary arrangements in the United Kingdom that fell to the wrong side of the risks that were clearly outlined in my speech, we would provide clear and public advice on those."

Wage Growth

"In the absence of a pick-up in productivity growth, ultimately associated with investment, we are not going to see the uptick in real wages that will lead to a sustained period of above-trend growth."


"There is absolutely no danger of me or any member of my committee being influenced by any political timings."

Moving Back Towards Trend Growth Rates

"What's interesting with the most recent figures on productivity, which I think you need to take with a big grain of salt because they're always revised, the most recent figures on productivity suggest around a 2 percent annualised growth rate, which is coming for the first time in a very long time towards trend."

Raising Rates, Unwinding Qe

"Any unwinding of QE should occur after several adjustments in interest rates."

(Asked on the position of the former Bank of England governor that when the time came to tighten, interest rates would rise by 0.25 percent and then quantitative easting would start to be unwound, Carney said):

"My personal view would be that it would be more appropriate to, most appropriate to, adjust interest rates to a greater degree than that before we considered adjustment in the quantitative easing programme, and that's based on a pragmatic sense of where we would have flexibility.

"In other words, if the time comes to tighten monetary policy, we should start with, in my view, we should start with the bank, we should tighten it as appropriate, we should maintain the ability to adjust it down as well as up if subsequent events, a shock to the economy, whatever happens, occasion the need to provide stimulus after the initial tightening. I think it would be more difficult to adjust the quantitative easing programme in both directions."

Unwinding Qe

"We're not going to sell 375 billion of gilts, that's a hypothetical question, purely hypothetical.

"The unwinding (of quantitative easing) will have an impact which is why we will coordinate with the Debt Management Office."

Inflation Expectations

"What we have seen over the course of the last several months is that inflation expectations on the margin have become better anchored, or more well anchored."

Forward Guidance

"I think we're moving back to where we started. But we're still in a position where we're providing considerably more guidance than we did in the past. We will welcome the day when we get back to status quo."

On How Much Rates Could Rise

"We have provided guidance about how we think interest rates would adjust when the time comes to adjust them. In other words, in a gradual and to a limited extent.

"Some members of the MPC have put more precise figures on the extent to which interest rates would be expected to rise over the three-year horizon.

"Charlie Bean yesterday referenced 2.5 percentage points. I don't think that's an unreasonable sense to get across - a 2-2.5 percent bank rate over the course of the forecast horizon."

On Gradual Rate Rises and Extraordinary Times

"We expect that when the time comes ... to begin to raise interest rates, we would expect that process to be gradual and we would expect the degree increases to be limited.

"The limited level of increases is occasioned by the fact that we are still, we will still, in our collective judgement be living in extraordinary times a few years down the road where we have weakness from abroad, particularly Europe; ongoing fiscal consolidation; we have a global savings glut occasioned from emerging markets; and we also have a financal system which we think is going to settle out having higher costs of credit relatively to the risk-free level of interest rate, and we need to take all those factors into that account."

On Mortgage Spreads

"We do expect that over the course of the projection horizon that mortgage costs will increase because of, just using the market curve of interest rates, we don't expect much further compression of spreads, so there should be an increase in floating rate mortgage costs over the course of the next few years."

Underwriting Standards of Mortgage Providers

"Underwriting standards at present of mortgage providers are quite high ... Our concern is that those underwriting standards will deteriorate and that that deterioration itself would be fed by general improvement in the housing market."

Housing Market

"Our concern would also be that a rising housing market, occasioned in part because of the dynamics in prime central London would encourage individuals to take greater risk without fully incorporating an entire interest rate cycle, and cycles, that would transpire over the life of a mortgage."


"What we've learnt over the course of the last seven months since we put in place the first phase of forward guidance, or so what I've learnt, is that that equilibrium rate of unemployment has gone down. It's lower than we would have thought in August and in August we estimated as a committee that it was about 6.5 percent. I personally would mark it around 6 now, potentially slightly lower.

"So we have a 7.2 percent unemployment rate a year at present, relative to a medium-term equilibrium level of about 6 percent."

More on Spare Capacity

"We ranged in the February inflation report (that spare capacity) was 1-1.5 percent. I personally would be at the upper end of that range and I would add that the margin, given the most recent employment report, that it would probably be slightly higher than that 1.5 percent."

Paul Fisher, Boe's Executive Director for Markets:

(During discussion about how QE might be of interest to historians in future):

Should Mpc Keep Recordings of Mpc Meetings?

Fisher: "I think it's a good question. I think it would potentially change the nature of the debate away from where it is now."

David Miles, Member of Boe Monetary Policy Committee:

Wage Settlements

"I think we're getting to the point at which average wage settlements are moving above the rate of inflation."

On Sme Credit Availability and Overall Outlook

"The situation slowly has improved, I think 18 months ago if there were 10 or 15 small businesses around the table seven or eight of them would have said it was one of the things they really worried about, the availability of finance. If you had the same number of companies now I think it would be three or four. It's slowly got better."

"I detected more optimism amongst small and medium sized companies in the last six to 12 months than in any time since I've been on the committee, in terms of the outlook for demand and growth."

Martin Weale, External Member, Monetary Policy Committee:


"From the second quarter onwards growth has been at close to trend rates. At the same time, partly as a result of the rise in the exchange rate, inflation has dropped to slightly below its target; I had thought inflation would remain above target for rather longer."

Spare Capacity

"Overall, my best estimate of the amount of spare capacity in the economy is something under 1 percent."

Governor Mark Carney:

Capacity in Uk Labour Market

"My personal view would be that there is some spare capacity in firms as well as in the labour market ... but there are different views on the committee on that."

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below