Mark Carney: Return of the unreliable boyfriend

Ryan Bembridge

July 14, 2016

Scotiabank economist Alan Clarke has called it the “return of the unreliable boyfriend” with the Bank of England holding rates at 0.50% after Governor Carney (pictured) talked up the expectation of a rate cut earlier in the month.

Clarke, who is the bank’s UK and Eurozone economist, accused Carney of pouring petrol on the flames with unnecessary intervention.

He said: “Virtually nobody was going for a rate cut at this meeting before Carney’s intervention a couple of weeks ago.

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“Most assumed that the weakness of the pound and the need to wait for incoming data would lead to a pause at least until August. But for no apparent reason, Governor Carney decided to tease the market, let it price in a high probability of a rate cut, only to disappoint.

“As if the situation wasn’t volatile and uncertain enough, the BoE Governor poured petrol on the flames. This was a completely unnecessary intervention.”

He added: “The Governor may well argue that the point of forward guidance is for households and businesses and not just financial markets and that the latter should know better.

“But quite frankly, the Governor should know better; he should know that the markets are super sensitive to BoE communications.

“The majority of members judged that loosening would be appropriate in August. Why wait? They also discussed what form that might take, hence the combination of a rate cut and unconventional policy easing seems likely.”

This nine-strong Monetary Policy Committee has voted to keep the interest rate at 0.5% for a total of 88 months.

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  • monkey

    This is a classic overreaction, an example of market participants believing they deserves the inside track and are therefore licenced to overinterpret Carney’s words. What he actually said was that there was a case for supportive action from the Bank over the summer. He did not specify July. Market participants should not have done so either. The fact is people don’t like being wrong, so they blame the guy who didn’t fulfil their forecast.