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REPEAT: MNI: Future UK Policy Path Outlook Driven: BOE Carney

MNI (London)
Repeats Story Initially Transmitted at 19:10 GMT May 24/15:10 EST May 24
--Five Things Of Note From BOE Governor Mark Carney Speech At SPE
     LONDON (MNI) - Bank of England Governor Mark Carney spoke Thursday to the
Society of Professional Economists. Here are 5 things of note from the speech.
     -- Carney opened by saying the future path for policy will "depend on the
outlook for the economy which in turn will depend very much on how the Brexit
negotiations evolve." He stressed that monetary policy is always contingent on
the economic outlook, which is broader than it being data dependent. In order to
achieve the inflation target, he said, monetary policy needs to adjust not only
to news about current conditions but also to any changes in likely future
circumstances. "While it may be the MPC that sets interest rates, it is
ultimately the economy that determines them," he said.
     --Underlining that how the Brexit negotiations evolve will be paramount in
how monetary policy evolves. But he was clear that the central bank, at least
when it comes to monetary policy, is ready for the UK's departure. "My message
this evening is straightforward. From a monetary policy perspective, the Bank of
England is ready for Brexit whatever form it takes."
     --Carney again stressed that the BOE's forward guidance is aimed "first and
foremost" to UK households and businesses. He stressed that the views of
economists and financial market participants are central to the transmission
mechanism from Bank Rate, set by the MPC, to the various interest rates facing
households and businesses and to asset prices more generally. He added that
guidance can reinforce the transmission mechanism by reducing unnecessary
uncertainty - not eliminating all uncertainty, but stressed that is not the same
as guaranteeing the future stance of monetary policy. Indeed, "market
participants can be expected to pay the closest attention to any explicit
conditionalities around guidance and should usually be the first to update their
expectations of policy as the outlook for the economy changes," he said.
     --Confirming current guidance by the Monetary Policy Committee, Carney
said, as the MPC has stressed, "were the economy to develop broadly in line with
the May Inflation Report projections, an ongoing tightening of monetary policy
over the forecast period would be appropriate to return inflation sustainably to
its target at a conventional horizon."
     --The Governor confirmed that the MPC in the process of reviewing the
possible range for the equilibrium real interest rate in the medium term. This
analysis, he said, "reflects the importance of global equilibrium rates for the
UK, and the possibilities that the global equilibrium real rate may rise as the
global recovery proceeds and that domestic cyclical factors such as the pace of
public and private balance sheet repair may shift. The Committee intends to
provide information about its updated view in its August Inflation Report."
     The full text of Governor Mark Carney's speech is available here:
https://goo.gl/GPcKKY
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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