Carney U Turn On Interest Rates

Carney U Turn On Interest Rates.

Mark Carney, Governor of the Bank of England is now issuing mixed messages on interest rate rises suggesting that rates rises may not be required as there is spare capacity in the employment market.

Speaking before the Treasury Select Committee he said: "Taken in isolation the continuation of development on the wage front suggests to me that there has been more spare capacity in the labour market than we previously had thought."

Comment

What is Mr Carney saying?  He is essentially saying that there are plenty of vacancies meaning that wages may not rise.  If there is a staff skills shortgage then you pay more to attract quality staff.  Wage rises in turn drive up prices putting pressure to increase interest rates.

The prospect of interest rate rises strengthens the pound, meaning British exports become more expensive and drive stockmarkets down.

Can we really trust Mr Carney?  In one breath he suggests rate rises are imminent in another he suggests not.  We suggest this is a PR game.  Managing the economy on a "spin" basis is not the way to do it.  We believe the Bank of England and indeed the Government wish to keep interest rates as low as they can for some time yet.

There is a conflict of interest as we keep repeating.  This Government needs:

• Property prices to rise raising stamp duty taxes
• Property prices to rise to reduce toxic mortgage debt on banks that Government has a stake in.  This means they can sell their share in the same for a profit.
• Property price rises means a greater government profit in the Help to Buy Scheme
• A weak pound means British Goods are cheaper overseas
• A weak pound means imports are more expensive meaning the British will buy cheaper home goods and materials rather than import.