The City on Brexit: Forget gloom-monger Carney — Chote's the man we need to listen to

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Those who listened attentively to Mark Carney when he spoke a week after the referendum should know one thing: his job is not to talk about economic growth. 

That responsibility falls squarely on the shoulders of a man who has said nothing. When he does, I don’t care what you are doing, stop it and listen and listen carefully. 

The man whose words have so much significance is Robert Chote, the chair of the Office for Budget Responsibility. If I were to anticipate what Chote will say it will be this. Until we have tangible reliable data we will not know what effect the events since the vote have had on the real economy. This accepted, based on standard macro-economic principles, the devaluation in sterling is likely to provide a boost against the forces that might otherwise slow the economy, those currently traumatised and staring at the headlights when they should be enjoying the view ahead. 

The pound’s decline, for which Mark Carney’s jawboning can at least be commended for helping slip still further, will lift our fortunes not harm them, from helping our exporters to increasing tourism. It will also boost inflation, including wage growth, which in itself is not unfavourable to growth as real wages are lifted. 

The reassuring post-referendum words of Professor Lord King have helped in anticipating what Chote might say. King, who preceded Carney as Bank of England Governor, lofts over him academically and by experience. I am also reassured that Chote sits alongside Professor Stephen Nickell on the three-person OBR committee, the latter a former member of the MPC and one of the world’s foremost economists. 

As for why Carney chose to speak ahead of Chote the answer is simple. He is trying to undo the harm to his reputation caused by being so vocally against Brexit and having to watch as his dystopian economic predictions fail to materialise, as much as he tries to invite them on.

Savvas Savouri is chief economist at Toscafund Asset Management

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July 5, 2016 |
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