On Thursday 30th June, Mark Carney gave his first significant speech since the immediate aftermath of the referendum result.
Before we get to that, I have a question for you. Who is the more powerful and significant figure when it comes to making financial decisions in Britain – George Osborne or Mark Carney? Osborne is a democratically elected politician in charge of the government’s finances. Carney is unelected but in charge of managing the thing all of our finances are built upon: Britain’s money.
It certainly seems that Carney has assumed a more prominent position over the past week. Remember: Osborne told us that he didn’t consider it his job to plan for Brexit.
(Whose job was it then George? Roy Hodgson’s? It’s a low point for the nation when public servants charged with running the nations finances are brazen enough to admit that they’ve reinterpreted their role to exclude planning for anything but their desired outcome without telling anyone. Osborne essentially admitted he didn’t put his seatbelt on because he didn’t want the car to crash.)
Anyway. Back to Carney. Here’s what he had to say:
The UK can handle change. It has one of the most flexible economies in the world and benefits from a deep reservoir of human capital, world-class infrastructure and the rule of law. Its people are admired the world over for their strength under adversity. The question is not whether the UK will adjust but rather how quickly and how well.
Hmmm
I don’t quite know what to make of that. What he’s saying is true, though of course he said nothing of the sort prior to the referendum. And these charlatans tend to say whatever they have to in order to make the markets do what they want. My guess is that Carney wants the pound to go lower, but doesn’t want to see an all-out rout. Stuff like this just acts as a kind of psychological safety net.
Back to Carney:
The near-term challenges facing the UK economy can’t be wished away. But they can be addressed. A clear plan is needed, and its measures must be implemented with resolute determination.
How exactly can they be addressed? Given Carney is a central banker, surely you know the answer: lower interest rates and more QE. I said LOWER INTEREST RATES AND MORE QE.
Sorry to shout. Hard to be heard above the sound of Carney revving the printing presses up. Here’s how the man himself put it:
The economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.
Short version: forget about rates going up (they’ll probably go down) and prepare for more quantitative easing this summer.
As you’d expect, the pound fell after Carney spoke. The FTSE 100 rose – remember, a large percentage of FTSE 100 company earnings come from outside the UK, so weaker pound is often good for them. In any case, it’s clear this has further to run. And at times like this, you need a plan.
I’ll let Dan follow the story up soon. In the meantime, who is more powerful: Carney or Osborne?
Category: Central Banks