Bank of England Governor Mark Carney has taken a jab at Donald Trump, saying the president-elect’s criticism of the U.S. Federal Reserve is misdirected.
Mr. Trump has slammed the Fed for keeping interest rates low and alleged that chair Janet Yellen was trying to help President Barack Obama. He has also warned that the Fed’s low-rate policy has created a “big, ugly bubble” in the U.S. economy and equity markets which will burst once rates rise.
On Tuesday, Mr. Carney took issue with Mr. Trump’s position during a parliamentary committee hearing in London. “The president-elect has voiced some views on the Fed and the stance of monetary policy,” Mr. Carney told Treasury Committee members. “It’s very important to distinguish between the stance of monetary policy and the reasons why global interest rates are low, the reasons why inequality has increased across major economies. The last two are caused by much more fundamental factors. And an excessive focus on monetary policy in many respects is a massive blame deflection exercise.”
Mr. Carney acknowledged that central bankers everywhere are coming under more scrutiny given the larger role they have been playing in the global economy. He has faced criticism over his comments about the bank’s monetary policy previously, particularly during a parliamentary committee appearance before the referendum on Britain’s membership in the European Union.
“The enlarged responsibilities of central banks … means that there is a much wider span of accountability,” he said. “We’re going to be challenged on multiple policies at multiple times. And that’s appropriate. It is natural that there will be more discussion around our policies.”
During the hearing Mr. Carney also faced some sharp questions about his decision to extend his stay at the bank for an extra year. Treasury Select Committee chairman Andrew Tyrie, a Conservative Member of Parliament, said Mr. Carney had prompted controversy and added uncertainty by changing his mind three times over the length of term he would serve. He pointed out that Mr. Carney refused the bank’s request to serve an eight-year term when he started in 2013 and said he would stay for five years. Last month he extended that to six years, saying he wanted to help Britain through the process of leaving the EU, which is supposed to start in 2017 and last two years.
“We’ve had five years in play, eight years in play and now a decision to go to six,” Mr. Tyrie said. He asked what would happen if the Brexit talks were extended. “Are you going to re-examine this issue?”
Mr. Carney said he would definitely leave on June 30, 2019. He said he was asked earlier this year by the former Chancellor of the Exchequer to stay for the full eight-year term. He offered to stay for six even though his personal circumstances meant he will be away from his family for a year.
“I’m extending in order to provide continuity to support this crucial process,” he said referring to the EU negotiations. “It’s no more complicated than that. I don’t think it’s added to uncertainty. There are far bigger issues that are adding to uncertainty in the global and U.K. economies.”
Mr. Carney also urged financial services firms not to make any rash decisions on moving operations out of the U.K. as a European Central Bank official revealed many have already been in touch on the matter.
“They’re making contingency plans, those contingency plans are in various stages of readiness and degree and specificity,” Mr. Carney told lawmakers.
Mr. Carney, a former managing director at Goldman Sachs, said firms should hold off until they have a better sense of the shape of the U.K.’s future trading relationship. He said a long transition period after the end of the two-year Brexit renegotiation is in everyone’s interests.
If it looks like the U.K. is heading for a so-called hard Brexit then banks may have to accelerate their contingency planning, Carney said.
“If the time to exit is measured in 18 months or less and the degree of exit is viewed as considerable then a number of those firms would take decisions, that’s the best guidance I can give.”
With files from BloombergReport Typo/Error