Will Brexiteers get their wish with BOE Governor?
With the UK Economy Strengthening, Can the BOE Justify Carney’s Comments?
Embattled Governor of the Bank of England (BOE), Mark Carney faces a stern test. Brexiteers are of the opinion that Carney should go, and they are calling for his ouster. Now that Britain is on a clear path to a Brexit, many believe that Carney should step down as head of the Bank of England. His term is set to expire in 2018, but opponents want him gone by the end of the year. Carney will make his personal announcement before the end of 2016. The Bank of England (BOE) has dismissed rumours that Carney will announce his resignation when the UK quarterly inflation report is released this week. On Thursday, 3 November 2016 the BOE will have to face the litmus test: it warned of the perils of a Brexit yet the UK economy is performing well. Should Mark Carney tender his resignation upon the release of quarterly inflation data, it may well lump him and the BOE together as having failed the British people.
How will inflation affect everyday Britons?
On Thursday, 3 November 2016 several high level announcements will be made by the Bank of England and its Monetary Policy Committee. These include the Monetary Policy Committee Meeting Minutes, the Bank of England interest rate decision (currently at 0.25%), Bank of England quantitative easing, the Bank of England Monetary Policy Committee vote cut, and the BOE inflation report. These have the capacity to impact the GBP in a big way. Already, the GBP/USD currency pair has crashed to a 31-year low and is currently trading at 1.2166. The year-to-date performance of the sterling/greenback pair is -17.42%. Against the euro, the sterling is down 17.73% for the year at 1.1166.
If the sterling plunges further, inflation will rise well above the 2% target set by the BOE. This is likely to take place in 2017 and it will impact upon UK households in a big way. Perhaps the more important issue when it comes to Mark Carney is the fact that he is regarded as a stabilizing force in the UK economy. His definitive actions have assuaged investors across the board, both domestic and foreign. Carney’s departure would send the sterling into freefall, and that is in an anathema to economists. The main gripe that folks have with Carney is his bias with former Prime Minister David Cameron. It is no secret that Carney opposed the Brexit and worked hard to convince Britons not to vote in favour of a Brexit. For that reason alone, the overriding consensus is that Carney must go.
What is the Prime Minister’s opinion?
Prime Minister Theresa May has been fully supportive of Mark Carney. Now, as she moves past 100 days in office, her outline for a Brexit is clear. Many close confidants of the Prime Minister want Governor Mark Carney to stay on through 2021. But for Carney, it all seems too clear: He was appointed to serve until 2018, beyond which he will have to make a personal decision. But Carney has stressed the independence of the Bank of England from government intervention. Spread betting authorities are reading Carney’s words in one of two ways: he intends to stay on, or he may indeed give in to Brexiteers and exit his post. Carney initially indicated he would only stay for the first term, but now that his family is happily situated in London, he may consider staying longer.
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About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for spreadbettingreview.co.uk.