Bank of England governor Mark Carney has responded to slights from Conservative MP Jacob Rees-Mogg, telling him he is “absolutely serene” on the judgements made by the monetary policy committee in the the lead up to and aftermath of Brexit.
At this afternoon’s the treasury committee, chairman Andrew Tyrie told Carney he would have the chance to answer allegations that he “over-egged” the economic shock that would come from Brexit and that he then sought to justify those forecasts by overreacting in the monetary stimulus after the vote.
Tyrie admitted the fall in the pound had not been over exaggerated, but that many people had argued the devaluation needed to happen regardless of Brexit.
Responding to questioning from Rees-Mogg, Carney told the committee: “In terms of how the economy has responded, what’s happened directionally on business investment and commercial real estate and the bigger decisions and that relative to the resilience of the consumer sector, I feel comfortable that the judgement that the referendum represented a risk to monetary policy.”
This week, UK services PMIs rounded out a “hat-trick” of positive economic indicators, following abysmal slow downs in the immediate aftermath of Brexit.
Carney told today’s meeting that without Brexit monetary policy would have tightened in a “limited and gradual” manner. However, he welcomed the “signs of stabilisation in the economy”, referring to the consumer sector.
Among his questioning, Rees-Mogg asked Carney: “In light of the economic data now available, how happy are you with comments you made prior to the referendum?”
To which Carney responded he was “absolutely serene both by the judgements made by the MPC and the FPC” taking into consideration the events since the referendum.
“Certainly there has been pressure in the commercial real estate sector, most evident in the scale of transactions in commercial real estate,” Carney says, stating the suspended trading in open-ended property funds was a manifestation of that.
Commercial property transactions have more than halved since the beginning of the year, the committee heard.
Carney told Rees-Mogg that as an asset manager the Conservative MP should be aware that approximately half of the FTSE is internationally orientated so was repriced after the referendum with the pound’s depreciation. “You’ll accept that,” he told Rees-Mogg.
The Conservative MP is a founding partner at global emerging markets asset manager Somerset Capital Management, which holds $6.8bn assets under management.
Within a week of the vote the FTSE 100 was up 5.4 per cent while the more domestically-focussed FTSE 250 was down 3.6 per cent, a gap of 9 per cent.
“UK-focussed companies were hit a lot harder,” Carney said, but he argued monetary stimulus had helped support domestically-focussed companies and residential real estate. He stressed, however, it was still early days and economic data released so far represented a “few straws in the wind”.
Rees-Mogg, who wants to leave the single market and the customs union, has previously been vocal about his view that the Bank of England failed in its duty to remain impartial by declaring Brexit a risk to the economy.
Writing for the Sunday Express over the weekend, Rees-Mogg described the EU as a “rotten apple” and said leaving it was the greatest opportunity for the UK since the repeal of the corn laws in 1846.