Carney Tells Theresa May He’s Not Done Talking About BrexitBy and
Bank of England celebrates 20 years of monetary policy control
Carney hails BOE independence, but says it can’t do everything
Bank of England Governor Mark Carney told Theresa May that he will not shut up about Brexit.
Carney has spent more than a year under criticism from U.K. lawmakers for appearing to take sides in the Brexit debate and for being too gloomy in his forecasts. In a speech at a conference to celebrate 20 years of BOE independence on Thursday, he told the audience, which included the prime minister, that he would continue to express his views on the matter.
“We will continue to assess and express our independent assessment of the risks associated with Brexit,” Carney said.
Although monetary policy could respond to the risks related to the exit from the European Union, and other financial issues, people should not confuse “independence with omnipotence,” according to the governor. Most of the adjustments necessary to smooth the process are not in “the gift of central bankers.”
Central banks’ roles have come under increasing scrutiny in recent years. In the U.S., Federal Reserve Chair Janet Yellen has been at odds with the anti-regulatory rhetoric of Donald Trump, who will decide whether to replace her when her term expires on Feb. 3. The European Central Bank has also been criticized for the diverse effects of its monetary policy across countries.
When Theresa May spoke, she highlighted the importance of the U.K.’s free market economy and said that the new and defining characteristics of central banks are “openness and transparency.” May, who sparked controversy last year by saying some central bank actions were not working for average Britons, also said it was up to the government to mitigate any side effects of BOE policy when pressed by a question from the audience.
Meanwhile, former Prime Minister Gordon Brown, who granted the bank independence in 1997, said there was a need for greater coordination with the government, and called for the creation of a oversight group between the BOE and Treasury for financial policy. The lack of such a body may “haunt us,” he said.
Carney also said the need for the BOE to be “open and accountable” is greater than ever because of “growing distrust of institutions and the ‘experts’ who reside within them.” That’s a direct pushback against politicians such as Michael Gove, who said during the heated Brexit referendum debate that Britons have “had enough of experts.”
“While carefully circumscribed independence is highly effective in delivering price and financial stability, it cannot deliver lasting prosperity and it cannot solve broader societal challenges,” Carney said. “This bears emphasizing because in recent years a host of issues have been laid at the door of the Bank of England from housing affordability to poor productivity.”
The event comes as the BOE, which added stimulus in the wake of the Brexit vote, moves closer to increasing interest rates for the first time in more than a decade. Chief Economist Andy Haldane said in an interview with Sky News on Wednesday that a hike should be considered good news for the U.K., rather than a source of fear.
May and Carney are just two of many high profile speakers at this week’s conference in London. Outgoing Federal Reserve Vice Chairman Stanley Fischer, IMF Managing Director Christine Lagarde, Banco de Mexico Governor Agustin Carstens and Bank of Israel Governor Karnit Flug are all also due to speak over the next two days.
— With assistance by Lucy Meakin