Photo by Bank of England/Flickr
Mark Carney, the governor of the Bank of England, is set to face questions on Tuesday from a House of Lords committee over the economic forecasts and the threat that is posed by Brexit.
The Lords Economic Affairs Committee is chaired by Lord Forsyth of Drumlean. The committee is set to ask why the economic projections of the Bank in August 2016 – when it decreased interest rates for the first time in over seven years in order to ward off a Brexit recession, differed “substantially” from the reality.
Carney has become known for his gloomy outlook regarding Brexit. He will also be questioned on whether he thinks it is possible that the United Kingdom and the European Union will be able to strike a trade deal on financial services.
Last Friday, Carney informed the BBC Radio 4′ Today programme: “What’s happening in the UK is effectively the Brexit effect in the short-term, and I would underscore ‘in the short-term’.” He also addressed better-than-expected economic data from the fourth quarter of the past year.
The shockingly optimistic figures which were revealed by the Office for National Statistics suggested that the economy of the United Kingdom grew by 0.5 percent during the final months of last year. It has renewed the expectations of the market regarding an interest rate hike to 0.75 percent as soon as May of this year.
“This is an undeniably strong report that increases the chances that the Bank of England’s Monetary Policy Committee follows up November’s interest rate rise as soon as this summer,” stated Pantheon Macroeconomics’ Samuel Tombs.
Last November, the Bank of England increased interest rates to 0.5 percent from 0.25 percent even though Carney said last week during the World Economic Forum at Davos that any further hikes would be strongly dependent on the progress that is made in the negotiations regarding Brexit.
An economist at investment platform Hargreaves Lansdown, Ben Brettell, stated that despite surpassing expectations, the economic performance of the United Kingdom remains to be weak.
“With growth anaemic, I can’t see any rush to raise rates,” said Brettell. “Last year’s quarter-point move seems like a tacit admission that the cut to 0.25 percent was unnecessary in the first place, rather than the start of a sustained upward trend. I’d be somewhat surprised if we saw more than one rate rise this year, probably in the autumn.”