BoE mandate should be regularly reviewed – Mark Carney

Posted on November 15, 2016

The Bank of England should have its inflation-targeting mandate reviewed on a regular basis by the government, governor Mark Carney has said.

Speaking to a committee of MPs on Tuesday, Mr Carney said he would support a Canada-style arrangement where the central bank’s mandate to target inflation and output is reviewed periodically but should not be done so at times that can immediately effect the level of interest rates.

“There is merit in reviewing the remit on a periodic basis”, said Mr Carney, a former central bank chief in Canada.

Mr Carney said the BoE’s remit was last adjusted by then chancellor George Osborne in 2013, to provide a more flexible look at the inflation target of 2 per cent. However, it was unlikely that the UK would ever move towards a Federal Reserve-style mandate which targets inflation and unemployment.

Rate-setter Ian McCafferty sad he supported regular reviews of the inflation target which currently stands at 2 per cent. There was “a debate to be had whether that [inflation target] should be changed”, he said.

On Brexit, Mr Carney said the BoE was on hand to help the government in providing “technocratic support” in the Brexit talks.

He added that the UK central bank was in “close and continual contact” with counterparts at the European Central Bank and the continent’s national central banks to ensure a “smooth” Brexit process, which limits any adverse impact on financial stability.

Around 45 per cent of UK businesses surveyed by the BoE have reported an impact on their investment outlook from the impending Brexit talks, said the governor.

Of these, half intended to delay or cancel investment, said Mr Carney. For the other half of UK firms, the EU was a “non-issue” due to their domestic focus. “For them, [Brexit] is a side issue”.

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