June 26, 2019 / 9:51 AM / 4 months ago

Highlights: Bank of England's Carney speaks in parliament

LONDON (Reuters) - Bank of England Governor Mark Carney and other top officials from the central bank spoke in parliament on Tuesday about the BoE’s Inflation Report which was published in May.

FILE PHOTO: Bank of England Governor Mark Carney speaks during an Inflation Report Press Conference at the Bank of England in the City of London, Britain May 2, 2019. Matt Dunham/Pool via REUTERS/File Photo

CARNEY ON NO-DEAL BREXIT

The path of interest rates, in the markets judgment, is lower because they are ascribing some possibility to no-deal. And in the event of no-deal, that interest rates would be lower than they otherwise would be.

The markets to the best of our knowledge, our analysis, are not saying at this point that no deal is the most likely scenario.

The market assessment is that it is more likely that there is some sort of path to some sort of deal than not; that could change, and asset prices will change accordingly.

CARNEY ON FORECASTS

In the event that the policy of the government were to switch, the forecast of the Bank of England would switch accordingly.

In the event that there is no deal, the response would not be automatic, it would depend on demand, on supply and where the exchange rate went.

CARNEY ON GLOBAL TRADE TENSIONS

On one level, just simple tariff analysis of the trade measures lead to notable but not that material impacts on, certainly, the affected economy and relatively marginal impacts on the global economy and the UK economy, so what really matters to us is the amplification channels through, particularly, business confidence that can be most pernicious.

There is a somewhat limited ability of monetary policy to offset that. We’ve seen sharper moves in monetary policy’s expectations in markets, but one has to temper the expectations about how much those policy changes could actually address great uncertainty effects on business.

CARNEY ON POLICY AND POLITICS

I don’t think monetary policy is being politicized in the UK, I’ll state that.

CARNEY ON GATT 24

If one is asked, can you have no-deal and Gatt 24?

There needs to be some form of agreement and an intention, a credible intention to move toward a free trade (deal) or customs union.

CARNEY ON BUSINESS INVESTMENT

Market expectations of no deal have gone up in recent months. There has been a notable increase.

The degree of uncertainty (for businesses) is as high as it was just prior to the March 29 deadline. If you squint marginally it’s gone up a bit.

As best as I can tell, this uncertainty effect that has been weighing on business, and particularly business investment, is continuing to operate.

Expectations of no deal have gone up in markets, that uncertainty is still there for business and that is affecting the short term economic performance.

SAUNDERS ON ROLLING BREXIT DEADLINES

A series of rolling deadlines would probably imply a heightened uncertainty and have a greater adverse affect on growth.

Now that is not a reason to do the things that business fear..., but the outlook for the economy would be very different if you knew now that there was going to be a smooth Brexit compared to one where you have a rolling series of deadlines and at each point there is the risk of a no-deal Brexit.

Reporting by Kate Holton and Katya Sanigar

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