Carney leaves the Bank of England, not with a bang, but a whimper

In Mark Carney's final rate-setting meeting as governor of the Bank of England, the Monetary Policy Committee has voted to keep interest rates where they are.

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. 

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.  

Recommended

When investors get over-excited, it’s time to worry – but we’re not there yet
Sponsored

When investors get over-excited, it’s time to worry – but we’re not there yet

When investors are pouring money into markets, it can be a warning sign of impending disaster, writes Max King. So how are fund flows looking right no…
26 Oct 2021
An investment trust that gives exposure to frontier markets
Investment trusts

An investment trust that gives exposure to frontier markets

An investment trust investing in small, illiquid emerging markets has disappointed, but deserves another chance, says Max King
26 Oct 2021
What does Rishi Sunak have in store for investors this Wednesday?
Budget

What does Rishi Sunak have in store for investors this Wednesday?

Rishi Sunak is unveiling his spending plans for the economy this week. John Stepek analyses areas which may be most hit by the budget.
25 Oct 2021
How rising interest rates could hurt big tech stocks
Tech stocks

How rising interest rates could hurt big tech stocks

Low interest rates have helped the biggest companies to entrench their positions. But what if rates rise?
25 Oct 2021

Most Popular

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021