BOE Carney defends Brexit stance, mortgage rates could rise
The governor joined Monetary Policy Committee members Ben broadbent, Gertjan Vlieghe and Martin Weale in front of the select committee.
It came after the Bank of England released a markedly stern warning earlier this month that the UK economy would suffer in the wake of Brexit, including the possibility of a "technical recession".
Carney said he believes the central bank has highlighted the key issues around the EU referendum, including short-term uncertainty and the potential change in the trade-off between output and inflation, and he would not expect "something substantially different" to be said.
"I am not intending to [say something else] but I'm one person on the committee," he said.
He added in a hypothetical example, saying that given "the degree of uncertainty engendered by the referendum campaign and its impact on economic variables, I would not exclude the possibility that there is some evolution of the committee's thinking on that.
"I'm one member of the committee, we'll have a few more weeks of data, things will move around, there may be a judgment around that."
Carney said such a judgement could be around underlying momentum in the economy as a consequence of Brexit.
He also spoke to the possibility of interest rate rises in the event of Brexit, saying he and Chancellor George Osborne have discussed potential developments on risk premium on sterling assets.
"For both of our direct responsibilities that risk is relevant. I would characterise it thus - the combination of the effects on demand and supply in the exchange rate could result in either a lower or a higher bank rate."
He said what he finds more likely is a risk premium on "risky assets" in sterling for a period of time, "and so even in the case of a potentially lower bank rate the overall mortgage rate could be higher."
Carney told the committee he believes it is not unreasonable to expect term premiums on UK assets to increase from the relatively low level, with those being more relevant for mortgage rates. ■