Commenting on the first Bank of England Monetary Policy Committee’s meeting with Mark Carney as Governor, KPMG Chief Economist, Andrew Smith, said:
“Change at the top yields no change in policy as the Monetary Policy Committee opts to keep interest rates on hold and leaves the level of QE unchanged – but speculation has already switched to next month’s meeting.
“The decision to hold fire is not a surprise – after all the new Governor has been in the job less than a week - but those who expected fireworks to accompany the arrival of Mr Carney may not have to wait too long.
“For while the recovery appears to have gained some momentum, it remains fragile. Households continue to be constrained by high levels of debt and falling real wages, the eurozone crisis is not solved and austerity measures continue to sap, rather than support, growth.
“And with Government bond yields creeping up –effectively a monetary tightening - it may be as early as next month that the new Governor fires his first shots. Additional QE and forward policy guidance will likely feature prominently.
“But before that, of course, Mr Carney has to do something the last Governor was unable to do -persuade the other members of the Committee that more stimulus is necessary. If he does not, more of the same is unlikely to yield the ‘escape velocity’ for the economy that he reputedly seeks.”
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Notes to editors.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.