It looks like Mark Carney is stepping down as governor of the Bank of England without a final blast of fireworks.
The Bank’s Monetary Policy Committee (MPC) met this week to make its January decision on interest rates. It was Carney’s last meeting as governor. At noon, he announced the latest verdict: the MPC voted by seven votes to two, to keep the UK’s key interest rate where it is, at 0.75%.That’s quite a big deal market-wise. As Ruth Gregory of Capital Economics points out, just a few weeks ago, financial markets were convinced (or at least had the odds at 70%) that there would be a rate cut.
In the wake of the decision to keep rates on hold, sterling bounced somewhat (when monetary policy is tighter than markets expect, it’s usually good news for that country's currency, all else being equal). That’s not to say that the MPC feels relaxed about the economy, or that it expects growth to improve rapidly. Indeed, the Bank’s forecasts for growth and inflation have deteriorated since last time.
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So the possibility of a future rate cut is still live, while any potential for tightening still feels a long way off in the distance. The current decision to hold is very much data-dependent. Solid business survey data for January appears to have stayed the MPC’s hand.
But the Bank is ready to act “should the more positive signals from recent indicators of global and domestic activity not be sustained or should indicators of domestic prices remain relatively weak." However, for now at least, it appears that Carney is going out with a whimper, rather than a bang.
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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