Bank of England: Mark Carney boosts value of pound by saying no to more quantitative easing
Governor says the strength and breadth of the economic recovery means no more cash injections are needed - for now
Friday 27 September 2013
The Governor of the Bank of England Mark Carney has said he doesn't see any reason why the Government should inject more cash into the economy, in comments which have given a big boost to the value of the pound today.
The pound surged up to be worth $1.6084 as the Canadian said recent signs of life in the economy meant the Bank could put on hold its programme of £375 billion quantitative easing (QE)
“My personal view is, given the recovery has strengthened and broadened, I don’t see a case for quantitative easing and I have not supported it,” Mr Carney said.
In an interview with the Yorkshire Post, the Governor said: “The advanced economies as a whole are doing a bit better. That's going to help the UK as a whole. These are more traditional export markets, so that matters.
“Within the UK, we are probably leading the pack of the major advanced economies as we speak right now.”
The Bank’s Monetary Police Committee had until now been torn on whether or not more QE would be needed, with three of its members voting for an extra £25 billion injection until June.
But this month the board, which sets the official interest rate for the country, was united in the view that the economy was in no need of further stimulus.
The committee is now signed up to forward guidance, under which it will not consider interest rate rises until unemployment falls to 7 per cent. The economy grew 0.7 per cent between April and June and is on course for even stronger growth in the current quarter.
Neil Mellor, currency strategist at BNY Mellon, said: “Carney is more of a pragmatist than the out-and-out dove the market has painted him as. Don’t forget that in Canada he introduced forward guidance and just over a year later he was raising interest rates.”
The Treasury has asked the Bank to play a bigger role in assessing the impact of its Help to Buy programme, which critics have said might cause a new property boom. Mr Carney said the Bank “needs to be vigilant” about the dynamics of a recovering housing market.
Mr Carney also gained a vote of confidence from the City’s fund managers, with a majority confident he will be an improvement on his predecessor, Lord King. Six in 10 fund managers polled by spreadbetter Capital Spreads said they believe he will do a better job on the economy, with 17 per cent of those questioned saying he will be a “significant” improvement. “Clearly the George Clooney of central bankers is going down a storm with City investors,” said Capital Spreads’ Nick Lewis.
Additional reporting by PA
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