May 10, 2018 / 11:37 AM / 17 days ago

HIGHLIGHTS-Bank of England's Carney speaks after leaving rates on hold

LONDON, May 10 (Reuters) - The Bank of England kept interest rates on hold and said weak growth during the snowy start to 2018 was likely to be only temporary, but it wanted to see a pick-up in the next few months before raising borrowing costs.

Below are comments from Governor Mark Carney and other members of the Monetary Policy Committee:

CARNEY ON ECONOMIC MOMENTUM

“The view of the committee as a whole is that we think the momentum in the economy is going to reassert.

“Now, this is not an economy that is growing at robust rates, but we expect it to reassert at rates that are stronger than the rate of growth of the supply capacity of the economy, that will continue to build domestically generated inflation, which will be increasingly important to the inflation profile, as the imported inflation from the past depreciation of sterling... comes off.”

CARNEY ON READING THE EVIDENCE

“What’s the sensible thing to do? Do you act now or do you wait to see evidence that that momentum is re-asserting?

“The judgement of the majority of the committee is you wait to see for some evidence of that reasserting.”

CARNEY ON RATES

“People in financial markets... if they can form a view of where they think the economy is going and update that view as the data comes in, and what it informs, then they can make a judgement about what we’re likely to do.”

“For households and businesses ... they have the general orientation which we are confirming today that interest rates are likely to go up to a limited extent and at a gradual pace and they should plan accordingly.”

CARNEY ON THE UK ECONOMY

“We’re in a different place from Europe, but we’re also in a different place from the United States, which... has some trade discussions, but not on the same order of magnitude or timeframe or materiality as Brexit... and isn’t in fiscal austerity but is in fiscal expansion.”

“So you have to set policy to the circumstance here, provide the guidance, and... in terms of it getting through to those who make economic decisions in the country, it does.”

CARNEY ON BEING AN “UNRELIABLE BOYFRIEND”

“The only people who throw that term at me are in this room. So now everyone else can throw it at me when I go out of this room.”

CARNEY ON RATE EXPECTATIONS

“The expectations of those individuals - more than three-quarters of those, whether they’re individuals or businesses - is that interest rates are going to go up, are likely to go up at some point over the course of the next years, probably a couple of times over the next year, year and a half.”

“So they are in a position that they can plan accordingly for that possibility, they don’t think it’s a guarantee, they think it’s a likelihood.”

CARNEY ON QE

“The committee has given past guidance on QE, and expressed preference that bank rate would be the marginal tool for effecting monetary policy... in due course, we will revisit that.”

“If it were being actively discussed, you’d see it in the minutes.”

CARNEY ON FORWARD GUIDANCE

“It’s important. It’s been necessary, and we still think that it’s inappropriate. It is useful information for people to have that perspective.”

“It is still useful to give an orientation on policy.”

CARNEY ON PRODUCTIVITY

“When you have pay growth in the 3, 3-1/2 percent, riding with productivity in the 1, 1-1/4 percent, that is unit labour cost growth, that is underlying inflation pressure from the domestic side, that is consistent with the 2 percent (inflation) target.”

CARNEY ON GROWTH

“(Earlier) guidance was explicitly conditioned on the economy evolving broadly in line with the committee’s February inflation report projections. In the period since then the economy hasn’t fulfilled those conditions.”

CARNEY ON BUSINESS INVESTMENT

“Turning to business investment... The drag from Brexit uncertainty, while persisting, has not intensified.”

“Business investment is expected to continue to expand at a moderate annual rate of around 4 percent over the forecast period.”

CARNEY ON BREXIT

“While the storms of February and March have given way to sunnier skies, the economic outlook for the UK remains clouded by Brexit uncertainties. Despite the welcome agreement on a transition period, the terms on which the UK will trade with the EU beyond that period remain to be determined.”

BROADBENT ON DATA RELIABILITY

“The early estimates for many of these things need to be treated with a degree of caution. We’ve been talking a lot for example about GDP in the first quarter of this year. We have one estimate of that. We can be fairly confident that’s going to be revised.”

“So one has to treat all these numbers with a degree of caution” (Reporting by Kate Holton, James Davey and Alistair Smout)

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