LONDON, May 22 (Reuters) - Bank of England Governor Mark Carney and other top monetary policy officials from the central bank were speaking to the Treasury Committee in Britain’s parliament on Tuesday.
Below is a selection of their comments.
“If you look at survey evidence of households and businesses over the course of this year, including today, the most recent household survey came out yesterday, more than three quarters of households expect rate increases over the course of the balance of this year and then to proceed at a very gentle pace relative to history.”
CARNEY ON FIRST-QUARTER GROWTH
“Our view is not that circumstances changed in the first quarter, it’s more likely to have been temporary and idiosyncratic factors that slowed the economy.”
“To put this all into context, interest rate volatility today in short term markets is very, very, very low relative to history. And it’s very low relative to the degree of economic uncertainty.”
“I prefer for our communications to be relative to how we see the economy developing going back to our remit, and I do think, as I think Jan recognised this morning, there is also a cost, a real risk which I’d put more emphasis on than Jan that things get lost in translation, that forecasts of interest rate are predicted to be are seen as promises...that would be my worry if we went down the rate path course.”
“One area where it might be useful to do more is to talk about where a neutral level of interest rates is. At the moment I think policy is providing stimulus. If spare capacity gets used up then it is likely over time we’d want to move to a more neutral rate.
“I think the neutral rate is significantly lower than it used to be. And I think that trying to flesh that out - to talk a bit about where a neutral rate might be - I think actually would be a useful thing.”
“My current forecast for growth and inflation is consistent with a gradually rising path of interest rates. My own central projection will require one or two quarter point rate increases per year over the three-year forecast period.”
“I think policy rates are likely to rise, in my central view, by 25bp to 50bp per year over the forecast period. That is slightly higher than the conditioning assumption for interest rates in the May 2018 Inflation Report. That is a forecast, not a promise, and will depend on how the economy evolves.”
“Even if the additional measures discussed so far are implemented as well, it would probably still not have a material effect on the UK. The risk scenario is one where there is significant broadening of the scope of tariffs across a wider range of goods, and/or a broadening of the set of countries that implement the tariffs, for example to include the EU.
“That could lead to a slowdown in global trade that can hurt the UK economy by several tenths of a per cent of GDP or more.”
“At the moment, there are no material differences between my forecast for the economy and the MPC’s collective view as published in the May Inflation Report.”
“There is always a drop in productivity after a financial crisis. So the fact that that happened in the UK is not so surprising,” he said.
“What is more surprising is that once we had lost the level, the growth rate after that, we didn’t expect to go back to the previous trend but actually we were on a weaker trend than before, and that’s been more surprising.” (Reporting by UK bureau)