Daily Management Review

Brexit minister accuses Bank of England of 'Dangerous Intervention


05/15/2016




Brexit minister accuses Bank of England of 'Dangerous Intervention
A Tory minister campaigning for Brexit has termed as “incredibly dangerous intervention” that has increased financial instability, the Bank of England’s warning that leaving the EU could lead to a recession.
 
The Bank’s governor Mark Carney was accused of disrupting the markets and jeopardising his independence by Andrea Leadsom, a Conservative energy minister. Last week Carney had argued that leaving the EU could lead to a financial downturn in the short term.
 
The Bank would be left with a difficult balancing act on interest rates after Bretix which could trigger a sharp lowering of the pound, stoke inflation and raise unemployment, Carney had said last week. After his comments, the Bank was accused of having a chequered record on forecasting by the leave campaigners who were infuriated by the warnings.

Claiming that the chances of self-fulfilling prophecy had been increased and Carney had destabilised financial markets just weeks before the June referendum, Leadsom’s criticism on the BBC1’s Andrew Marr Show on Sunday went a step further than other leave campaigners.
 
She said that “They are not there to promote financial instability but that is what they’ve done” and added that “to get involved in what might happen, that’s just not in their remit”.
 
 “It is institutional ganging up on the poor British voter who is trying to get a decent primary school place and doctor’s appointment,” she said.

She said that the Bank of England governor would be wishing that he had not done it and that the governor had “come out with some nonsense that is totally unjustifiable, totally speculative stuff”.
 
Saying the Bank of England governor had become highly politicized in what was meant to be an impartial role, Jacob Rees-Mogg, a backbench Tory MP, said Carney should be fired.
 
It was a lesson of the last financial crisis that an independent institution should have responsibility for stability said Carney while strongly defended his intervention on the same programm.
 
He said that his job was to be “straight with people” and another lesson was “not to cross your fingers and hope that risk would go away”. He added that it was “absolutely not” overstepping the mark to warn of possible storm clouds ahead.
 
“The lesson of the financial crisis, of the run-up to the financial crisis was to give an institution responsibility for identifying risk, not to cross your fingers and hope that risks would go away or everything would be all right on the night,” Carney said.

“But to identify the issues, come straight with the British people about them and then take steps to mitigate them – what brings those two approaches together, those two big lessons of the last quarter century, is transparency,” he added

“So we don’t just have a responsibility to the British people to be fair and not pop up after the vote and say, ‘oh by the way this is what we thought at the time’. But we also have a responsibility to explain risks and then take steps, because by explaining them, by explaining what we would do to mitigate them, we reduce them. And that is the key point: ignoring a risk is not to reduce it,” he said.
 
Carney declined to be drawn about the longer term financial modelling about the consequences of Brexit and said that it was a short-term forcast.

(Source:www.theguardian.com) 






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