EXCLUSIVE: Is Carney a strong, reassuring figure during the Brexit process?

Written by Oliver Wade
21/09/2018

Chancellor Philip Hammond recently announced to MPs that Mark Carney will remain Bank of England (BoE) governor until the end of January 2020, adding that the seven-month extension will “support a smooth Brexit”.

Many experts in the financial services industry have commented that the decision is a positive one, and will provide reassurance to the market.

Carney has previously stated that he was “willing to do whatever I can in order to promote both a successful Brexit and an effective transition at the Bank of England”.

Moneyfarm chief investment officer Richard Flax comments: “In the midst of so much political uncertainty, having a seasoned captain at the ship’s helm is reassuring for markets. It's tempting to say that policy-making shouldn't rely on a single individual, no matter how competent, but bringing in a new governor at this point, after so much preparation, would be a risky distraction.”

Furthermore, The Share Centre chief executive Richard Stone added that Carney proved to be a “steady and strong voice” during the European Union (EU) referendum in 2016. Also the BoE governor has overseen interest rates beginning to increase as the global economy “slowly normalises”, marking the first time in ten years that rates have risen above the level at which they were cut in the immediate aftermath of the financial crisis.

“Mark Carney’s comments in the lead up to the EU Referendum in 2016 placed him squarely as part of Project Fear in the eyes of many, particularly those who supported Brexit. The fact that economic growth has been stronger than predicted following the vote to leave the EU has impacted the credibility of economic forecasters, the Treasury and the Bank of England,” Stone adds.

The chief investment officer argued that “the need for stability is paramount”, as there is much uncertainty around the Brexit process and its potential impact on the UK economy, “and the City in particular, combined with the prospect of a No Deal looming larger”.

Stone concludes: “The decision and agreement to keep Mark Carney in his role as Governor for longer should be welcomed by investors as it removes one possible source of further change and potential uncertainty. Mark Carney has also demonstrated that under his leadership the Bank will act to support the economy and may move to cut rates again if needed. The consistency of monetary policy and tone from the Bank through the coming months should therefore be welcomed by all.”

Housesimple.com CEO Sam Mitchell echoes this message, stating that Carney remaining in his post until 2020 “will provide some stability during what is going to be an extremely turbulent transition period”.

However, he asks whether it is necessary for the governor to “be throwing out these headline grabbing doom and gloom scenarios in the lead up to the exit”?

“His claim last week that house prices would crash 35% over three years if we left the EU with no deal was irresponsible and unfounded,” he adds.

“This kind of unsubstantiated claim simply whips up fear in the market. Is Carney trying to cause the housing market to crash? The property market has proven extremely resilient to Brexit news and there's every chance it is robust enough to handle the economic turbulence heading its way.

"But Carney's doom-mongering will simply create uncertainty in the market.”

Mitchell concludes by acknowledging that no-one is claiming house prices are “going to boom” when the UK leaves the EU, “but any comment needs to be measured”.

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