The Bank of England looks set to upgrade its forecasts for the UK economy after admitting that some of the risks posed by the Brexit vote last June have now receded.
Giving evidence to the Treasury select committee, governor Mark Carney said the Bank’s actions to avoid a market meltdown after the referendum were a key reason why Threadneedle Street might be raising its forecasts for a second time.
Carney also said the government needed to agree a transition deal for quitting the EU and insisted that Brexit posed a greater risk to the remaining members of the EU than the UK.
The Bank will publish its latest report on the economy next month and will take on board the stronger than expected performance in the second half of 2016.
“I would say, and I’ll say this very lightly, which is that recent data would be consistent with some further upgrade of the forecast but that process has not yet started,” said Carney.
In November, the Bank raised its growth forecast from 2% to 2.2% for 2016 and from 0.8% to 1.4% for 2017. Carney said the Bank had helped to “make the weather” through its emergency actions to boost growth taken in six weeks after the referendum.
His testimony coincided with another strong performance by the UK’s leading stock-market quoted companies, with the FTSE 100 closing at a record high for a tenth successive day. Share prices for companies which are dependent on their US dollar earnings have been boosted by the continued weakness of the pound, which on Wednesday hit a near 32-year-low against the American currency of just over $1.20.
Carney was quizzed by MPs about the forecasting record of the Bank following remarks last week by Threadneedle Street’s chief economist, Andy Haldane, in which he described the collapse of Lehman Brothers as the economics profession’s “Michael Fish moment” – the UK weather forecaster who in 1987 failed to predict a gigantic storm coming.
