Carney Limbers Up for Awkward Brexit Encounter in Testimonyby
BOE governor and officials to appear in Parliament on Tuesday
Last appearance saw testy encounter with pro-Brexit lawmakers
Get ready for Round Two.
Mark Carney is limbering up for another encounter with members of Parliament’s Treasury Committee after a fiery exchange with pro-Brexit lawmaker Jacob Rees-Mogg in March over the U.K.’s referendum on European Union membership. In what’s due to be his last public engagement before a pre-vote purdah, the Bank of England governor will testify at 10 a.m. in London on Tuesday, alongside Deputy Governor Ben Broadbent and fellow officials Martin Weale and Gertjan Vlieghe.
Verbal sparring at their last meeting saw Rees-Mogg accuse Carney of acting politically and compromising the independence of the BOE by making “speculative” pro-EU statements. While the governor responded, saying it was consistent with his mandate to warn about risks, the Conservative lawmaker has since upped the ante and called for him to be fired.
“Testy exchanges would be unsurprising,” said Chris Hare, an economist at Investec Plc and a former BOE official. “Carney has and will probably continue to forcefully say that the commentary the BOE has delivered has been an open discussion of things that are within the bank’s remit. He’ll push home the point that it’s the right thing to do.”
With Carney intensifying his rhetoric and even saying Brexit could cause a recession, it’s fair to expect some fireworks. The keen focus on the EU vote risks distracting from important questions about the central bank’s broader projections for the economy and their implications for policy.
A key question is how much of the U.K.’s recent slowdown can be attributed to uncertainty surrounding the June 23 referendum and how much would be occurring anyway. The BOE cut its own economic projections this month and the U.K. Treasury’s compilation of independent forecasts shows others have also become more pessimistic.
Last week, BOE official Kristin Forbes said there’s no concrete proof the cooling is all being caused by the referendum, while Vlieghe said the economy might need stimulus even if Britons vote to remain in the EU.
“Everything is being overshadowed by Brexit discussions and in the background the things going on in the economy are falling by the way side,” said Hare. “I wonder whether there will be any further discussion on Tuesday. It will probably be a defense of the existing lines.”
The U.K. faces a yearlong recession if it leaves the EU, according to a Treasury forecast issued on Monday. While the government, the BOE, the International Monetary Fund and the Organization for Economic Cooperation and Development have all warned about the risks of an exit, their analysis has been dismissed by pro-Leave campaigners as misleading.
“Frankly this is all twaddle, it’s all speculation,” Roger Bootle, founder of Capital Economics Ltd. and a member of the Economists for Brexit group, said in an interview on Bloomberg Television’s “On The Move” with Guy Johnson. “There’s all sorts of other reasons by the way why there might be a bout of weakness in the U.K. economy. It shouldn’t just automatically be blamed on Brexit.”
Still, 280 economists have now signed up to a letter opposing an exit, Tony Yates, a professor at Birmingham University, wrote on his blog on Monday. That’s up from 196 when it was first published earlier this month in the London-based Times. Former Bank of England policy maker Tim Besley and former World Bank Chief Economist Nick Stern are among the new signatories, joining three ex-members of the BOE’s Monetary Policy Committee.
Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, has publicly supported the campaign to keep the U.K. in the EU.