Carney expected to resist urge for immediate change
Saturday 29 June 2013
A new era at the Bank of England dawns tomorrow as Canadian Mark Carney takes the reins and prepares for his first decision on interest rates and money-printing within days.
Mr Carney, the world’s most powerful, and expensive, central banker with a total remuneration package of £874,000, will chair his inaugural meeting of the Bank’s Monetary Policy Committee on Wednesday. Experts say the new Governor – whom predecessor Sir Mervyn King advised to “be himself” – could spring a surprise as soon as Thursday with a statement on recent market turmoil.
However, the Monetary Policy Committee is expected to hold interest rates at their record low 0.5 per cent and make no further asset purchases under its money printing programme for now.
US Federal Reserve chairman Ben Bernanke’s signals on slowing the pace of its own quantitative easing programme hit worldwide stock markets and sent government bond yields, which move inversely to prices, soaring. The rise in Government borrowing costs, which Sir Mervyn called “premature” last week, builds upward pressure on long-term interest rates and potentially threatens recovery prospects.
Capital Economics chief UK economist Vicky Redwood said: “We don’t expect a policy change but we should be on our guard. The MPC may tell us what it thinks on recent market movements.”
Mr Carney is an advocate for forward guidance on interest rates, subject to inflation being kept under control, but six of the nine-strong MPC are currently blocking more QE.
Markit chief economist Chris Williamson said: “The new Governor has an uphill battle if he is seeking instant action, especially after recent purchasing managers index data showing the economic recovery gathering momentum.”
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