Speaking at the European Central Bank Forum in sunny Portugal earlier this week, Carney announced: “Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional.”
The extent of the removal of the monetary stimulus will depend on how much weaker consumption is offset by business investment, whether wages and labour costs firm and how Brexit hits the economy, Carney added.
The speech marked something of a U-turn for Carney, who has seen growing mutiny within the ranks of the Bank of England among those who believe the time for a rate hike is now.
His chief economist Andy Haldane has been a vocal supporter of rate rises and after three of the eight members of the Monetary Policy Committee voted in favour of a rise at the last meeting, perhaps Carney is coming around to the idea of a change in tack.
It’s something that will be welcomed by the likes of the team at Legal and General Investment Management who have criticised the short-term actions of central banks and politicians.
LGIM CIO Anton Eser made the case for a return to more long-term solutions to the country’s woes and an end to policymakers misdiagnosing problems.
“Weak productivity and excess global debt cannot be solved with low interest rates, quantitative easing and political giveaways. This will in fact exacerbate income inequality and encourage social disorder,” he says.
