Like his American counterpart, Mark Carney is getting out of the central banking game. Unlike Janet Yellen, the Bank of England governor is doing so voluntarily, and also unlike Yellen, he’s decided against making his exit next year and will stick around until he can hand the post-Brexit mess to an unlucky successor in the summer of 2019.
Still, his time is short. And one thing Mark Carney has always wanted to do is something Yellen has already done, severaltimes: raise interest rates. Now, the terminally weak British economy has prevented him from doing so during his first four years on the job. Indeed, the highly inadvisable decision of the British people to leave the European Union forced him to actually cut rates. But he’ll be damned if he goes back to Canada without getting a thrill from tightening monetary policy at least once, and figures now’s as good a time as any to make such an inadvisable move himself.
Led by Governor Mark Carney, the Monetary Policy Committee voted 7-2 on Thursday to increase the benchmark rate to 0.5 percent from 0.25 percent. The minutes of their meeting underscored worries that the economy is fragile as the 2019 split with the European Union nears….
The decision to hike comes after multiple false alarms from Carney since he took over as governor in 2013, most notably in 2014 when his whipsawing of investors led to him being tagged an “unreliable boyfriend.”
There are warnings Carney is making the wrong move at the wrong time. In more ways than one, it’s an unusual rate increase.
With Brexit hanging over the outlook and the expansion feeble, the BOE’s not seeking to quell price pressures generated by strengthening growth. Rather, the bank is trying to slow inflation driven above its target by the weakening of the pound and the slide in the economy’s long-term trend.