BoE Chief: Monetary Policy Is Stimulative, Fiscal Policy Is Restrictive

BoE Chief: Monetary Policy Is Stimulative, Fiscal Policy Is Restrictive

BoE Chief: Monetary Policy Is Stimulative, Fiscal Policy Is Restrictive

Bank of England governor Mark Carney has said it would not be "appropriate" to build a "war chest in interest rate terms" to use in case of future shocks, even as he predicted inflation would rise above 3% in the short term.

"We will have the opportunity to gauge his reaction to this morning's inflation numbers, as well as his MPC colleagues Silvana Tenreyro and Deputy Governor David Ramsden when all three of them testify to MP's at the Treasury Select Committee".

Tenreyro, meanwhile, aired her opinion that she wasn't yet ready to vote for a rate hike.

Many economists still remained confident that Carney and co would still hike rates at their coming meeting.

"My view is that we are approaching a tipping point at which it would be necessary or justified to remove some of that stimulus", she said.

Though he's spared that letter-writing, Carney and the others on the bank's rate-setting panel are expected to raise the benchmark rate by a quarter point from the record low of 0.25 per cent at the next policy meeting on November 2.

However, the impact of the lower exchange rate on inflation is set to ease as the annual change of prices due to the pound's decline drops out of the comparison.

However, the Bank's policy makers like to keep us guessing and in prepared comments to the Treasury committee of MPs this afternoon, struck an unexpectedly dovish tone that hit the pound.

"There has been much talk of a rate hike later this year by the Bank of England, but with so many areas of weakness in the economy, and high levels of indebtedness, a rate rise could be a step too far for the Bank of England, at least until there is more clarity on Brexit".

"I still think there is some slack in the economy", Ramsden said, noting that he wasn't among the MPC majority at the September meeting that saw a likely need for higher interest rates soon.

The Office for National Statistics said consumer price inflation was 3% in the year to September, up from the previous month's 2.9%.

"The tick upwards in inflation will increase expectations of a rate rise from the BoE later on this year, stoked by a flurry of hawkish rhetoric coming from Threadneedle Street". Inflationary pressures have been mounting since the European Union referendum result in 2016 collapsed the value of the British pound, resulting in more expensive imports. That suggests investors are now less certain of a November rate hike.

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