Mark Carney, Governor of Bank of England (BoE) and Chairman of the G20’s Financial Stability Board advised he will stay on at BoE, on the same day the Pound was appointed October’s worst performing currency.
Carney has been managing Britain’s economy for the past three years and will remain at the BoE until end of June 2019 to see out turbulent Brexit negotiations. He will undertake the task of protecting the UK economy over the negotiations of Brexit that begin in March 2017.
Carney will forfeit 3 additional years of his Governor position, regardless of Theresa May’s vote of confidence. He told the parliamentary committee “To be clear, it’s an entirely personal decision and no one should read anything into that decision in terms of government policy. It is a privilege for me to have this role.” “Like everyone, I have personal circumstances that I have to manage. This role demands total attention and I intend to give it as long as I can.”
So what does this mean for the Pound?
Sterling has fallen over 20% since the Brexit announcement and worries about the economy declined further on Tuesday in spite of Carney’s announcement to maintain his position as Governor. While the overall fall supports exports, it implements huge pressure on inflation via import prices. Inflation is currently facing a breach on the BOE’s 2% target in 2017 and a Carney departure could have had greatly affected inflation causing huge hikes.
Other major concern surrounds investment from businesses. Recent reports by the banks highlight numerous businesses proposing to lower their investment and hiring strategies following the Brexit announcement. Additionally warnings from manufacturing organisations and banks may soon shift jobs overseas to ensure continued access to the EU with as many as 70,000 jobs been lost according to TheCityUK.
Carney’s aim is to help assure a peaceful and effective transition for the new relationship between the UK and Europe as 2018 could be very dark days for the UK following their exit. Economists welcome Carney’s announcement. HSBC’s chief UK economist, Simon Wells said “What markets want right now is stability, and so they’ll probably take the announcement positively”. The announcement will help retain structure and belief in the UK’s economy.
Focus will turn to the UK PMI (Purchasing Managers Index) meeting’s take place this Thursday where BoE policy decision, Inflation Report & a press-conference from Governor Carney will take place. A higher than expected reading should be taken more positively for the GBP, while a lower than expected reading should be viewed as a negative impact for the GBP. Financial markets will keep a close eye on these reports with results of political uncertainty lessening the Pound further.
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