Bank of England governor Mark Carney is set to face questions over the future of interest rates and his very own future at the Central Bank later today.
Carney will face a House of Lords committee about Brexit this afternoon and is if the bank misjudged the short-term impact of Brexit, how quantative easing will be unwound and his own future.
Kathleen Brooks, research director at City Index, said: “The markets will primarily be looking for any hints that Carney and co. at the BOE have plans to cut interest rates further. The market has pretty much priced out the prospect of a near-term rate cut from the BOE, but a dovish tone from Carney could see the market start to re-price the prospect of a cut, and the pound could take a hit.
“Mark Carney’s testimony comes at an interesting time, as relations between the BOE and the government remain tense after the PM appeared to criticize QE, and threaten the Bank’s independence. It also comes as Carney has two months to decide whether or not to leave the BOE in 2018, or stay on until 2021, he will make a formal announcement by the end of the year.
“If Carney voices concerns about the deteriorating relationship with the government then this would be the worst outcome for the pound in our view, as the last thing an already Brexit-frazzled foreign exchange market needs now is discord between the UK authorities. It could also make it more likely that Carney will quit his post in 2018, right in the middle of the UK’s Brexit negotiations.”
Mark Ostwald of ADM Investor Services added: “He will doubtless resolutely defend the BoE’s independence, though he may face some awkward questions about whether he will extend his term to the full eight years, and indeed whether he will complete his initial five year term.”
Carney has previously said he would decide by the end of the year whether to leave in 2018 or continue past that time.
The committee takes place a week before the Bank of England unveils its latest monetary policy decision with a further cut to interest rates being speculated.