LONDON: Following are highlights from Bank of England Governor Mark Carney's appearance before a British parliamentary committee to discuss the central bank's latest quarterly Inflation Report and outlook for the economy and interest rates.
Appearing alongside Carney were the BoE's chief economist, Andy Haldane, and two external members of its Monetary Policy Committee, Gertjan Vlieghe and Ian McCafferty.
BOE CHIEF ECONOMIST ANDY HALDANE ON CONSUMER SPENDING:
"It is certainly true that a majority of consumers so far have looked through the impact of what we've seen over the last six to nine months. In some ways perhaps that shouldn't be a surprise because there are more people in jobs than was the case nine months ago and their wages are still going up, their real income has been growing.
"That is now however about to change a bit as their incomes are squeezed by the rise in prices."
MARK CARNEY ON THE EQUILIBRIUM UNEMPLOYMENT RATE
"It has been reviewed regularly. There has been some discomfort from a number of committee members for the last few years that it's been too high."
HALDANE ON EQUILIBRIUM UNEMPLOYMENT RATE
"For the avoidance of doubt, personally I think the risks around that judgement (of an equilibrium rate of 4.5 percent) are genuinely two-sided. It strikes me as as likely that the equilibrium unemployment could be 4 percent as it could be 5."
CARNEY ON WAGE PRESSURE
"In terms of where wage growth has been, regular pay, average regular pay in the economy the most recent figures (show) a slight downtick in the rate of growth.
I wouldn't put too much weight on it but we don't see the pressure there."
"Our agents' survey (on) wage settlements for 2017 - which actually has some decent predictive power - actually shows a deceleration of wage growth from 2.7 to 2.2 (percent) for 2017. I think one can only explain that by some degree of uncertainty and the balance of bargaining power shifting a bit more to employers than from workers in this environment of uncertainty."
CARNEY ON IMMIGRATION
"This is something about which we will have to pay particular attention in the coming years if there's, as is to be expected, some adjustment to the nature, scale, magnitude of inward migration to this country and whether it has a macro economic impact, ultimately an impact on inflation, once you take account of both the supply and demand side."
CARNEY ON UNCERTAINTY AND HOUSEHOLDS
"Particularly for households if that uncertainty is not accompanied by a tightening of financial conditions then they look through it and it's entirely understandable because they're in jobs, wages are growing roughly as before, the economy's growing, so they look through this and it's right and it's positive for the economy."
MCCAFFERTY ON HOPE FOR RISING RATES IN NEXT 2-3 YEARS
"There is some hope I think that we can start to see the start of a gradual normalisation, if you like, over the forecast period."
CARNEY ON INFLATION
"Since November, there has been no uptick in inflation.
"The markets' judgement of medium-term inflation expectations has not shifted."
ANDREW TYRIE, CHAIR OF THE TREASURY COMMITTEE
Asking about the equilibrium unemployment rate:
"This matters a lot because the Bank of England can allow forecast growth to rise without inflationary consequences once you've lowered this number.
HALDANE ON THE AUTUMN STATEMENT
"Despite that net fiscal loosening in the Autumn Statement, it still is the case that we are going through a persistent period of fiscal contraction, so there is still a net headwind from fiscal policy embedded in our forecast albeit somewhat less of one than was the case in the past.
"The autumn statement announcements were a significant contributor to our upwards revision in our GDP projections in February, of which infrastructure was a component."
HALDANE ON FORECASTING
"I think there was a degree of collective amnesia, call it over-sight. We have seen financial crisis in the past and their seeds are often sown in leverage, and in that sense some of the lessons of history had been forgotten to some degree.
"(This was) by, not just parts of the central bank community but across the policy community, across academia and elsewhere. That was a big error."
HALDANE ON FORECASTING MISTAKES
"I actually was drawing a distinction between our learning from the time of the global financial crisis - which was a big one, massive error, big learning, to which we and others have then responded - and the events over the last six to 12 months where the error was on nothing like the scale, and quite a lot of what we have learned is basically new news, including policy changes."
HALDANE ON INFLATION FORECASTS
"If expectations keep on picking up from here, that would be a cause for concern for all of us, but thus far at least we've seen that correction take place and expectations stick."
GERTJAN VLIEGHE ON FORECASTING:
"We are probably not going to forecast the next financial crisis, nor are we going to forecast the next recession. Models are just not that good.
"There isn't one model which is right or wrong, and if only we had found a slightly better model then we wouldn't have made the mistakes that we have made. Some of this discussion is leading to unrealistic expectations of what we're going to get from economics in the next five years."
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