(Bloomberg) -- Bank of England Governor Mark Carney went another round in his defense of the central bank’s communications on Tuesday, when he faced questions from lawmakers.
Explaining the buildup to the May interest-rate decision and market expectations for tightening, he said guidance is conditional on the economic outlook and subject to revision.
“If the outlook changes, the actual policy stance will adjust,” Carney told a panel of lawmakers who scrutinize the work of the central bank and Treasury.
The topic of communications also dominated the governor’s press conference after the May 10 policy announcement. He was repeatedly asked about guidance since February, a period which marked something of a roller-coaster ride for investors. A rate increase was widely expected until only a few weeks before the May meeting, before the governor first cast doubt on such a move and data revealed a near standstill in economic growth.
He was asked by Treasury Committee Chair Nicky Morgan about whether a line in the BOE’s February statement -- which said officials expected policy to be tightened earlier than previously anticipated if the economy evolved as they expected -- was confusing in hindsight.
“What happened is the economy did not, in the first quarter, evolve broadly in line with our forecast. Inflation came in lower, economic momentum, a number of signs were lower, then ultimately the hard data came in lower as well.” Carney said. “And we as a committee stepped back, looked at that data and took our own assessments.”
While two of the nine Monetary Policy Committee voted to increase the benchmark rate to 0.75 percent this month, Carney said he and the majority “thought it made sense to take a bit of time” to assess the economy after the first-quarter weakness.