Mark Carney: Guidance, contingencies and Brexit

Speech by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, to the Society of Professional Economists, London, 24 May 2018.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

This evening I would like to discuss potential paths for monetary policy during the next, critical phase of the Brexit process.  Note the conditionality of the phrase "potential paths."  The actual path for policy will depend on the outlook for the economy which in turn will depend very much on how the Brexit negotiations evolve.  

Monetary policy is always contingent on the economic outlook.  This is broader than it being data dependent.  In order to achieve the inflation target, monetary policy needs to adjust not only to news about current conditions but also to any changes in likely future circumstances. While it may be the MPC that sets interest rates, it is ultimately the economy that determines them.