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Interview W IES Director On Outlook For UK Wages


German option recap

By David Robinson
     LONDON (MNI) - Bank of England Governor Mark Carney said investors were
placing growing more weight on the possibility of a no-deal Brexit and that
there was a "natural tension" between this and Monetary Policy Committee's
projections which assume a negotiated exit by the UK from the EU.
     Here are key points from testimony by Carney and fellow Monetary Policy
Committee members Jon Cunliffe, Silvana Tenreyro and Michael Saunders to the
Treasury Select Committee on the BOE's May Inflation Report:
     --Markets are currently not pricing in any rate hikes through 2020 while
MPC guidance is for limited and gradual hikes, and Carney and colleagues spelled
out the differences in market and BOE assumptions.
     "Market expectations of no deal have gone up in recent months," Carney
said, calling the increase "notable."
     Carney declined to be drawn on how likely he personally thought no deal
     --The MPC members highlighted how Brexit uncertainty is hitting business
confidence and activity.
     "The degree of uncertainty is as high as before the March 29 deadline (the
previous Brexit deadline)," Carney said
     "This uncertainty effect that has been weighing on business is continuing
to operate," he added.
     Saunders and Carney both stressed that the continuing uncertainty over
Brexit encourages business managers to wait and see what emerges.
     "Rolling short term uncertainty is particularly damaging for business
activity and confidence," Carney said.
     He added, however, that a no-deal Brexit was what businesses fear the most.
     --Carney said he believed the MPC was more likely to deliver stimulus than
tighten in the event of a no deal.
     Some MPC members, including deputy governors Ben Broadbent and Dave
Ramsden, together with Saunders, have publicly stuck to the line that policy
could move either way in the event of a no-deal Brexit and have declined to say
that easing or tightening was more likely.
     --While business confidence and activity have been hit by Brexit, the
effect has been less clear on consumption.
     Carney said consumers ability to service debts was as good as it ever has
been. Households have deleveraged while employment is high and interest rates
     Saunders said the impact of the two previous BOE rate hikes on mortgage
rates "had been pretty small so far," with lenders' rates not fully reflecting
--MNI London Bureau; tel: +44 203-586-2223; email:
[TOPICS: M$B$$$,M$E$$$,MT$$$$,M$$BE$]