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Sterling rises as Mark Carney answers questions to UK Parliament.
Incoming Bank of England Governor Mark Carney says “flexible inflation targeting” has “proven itself to be the most effective monetary policy”.
Answering questions from the UK’s Parliamentary Treasury Select committee Mr Carney said “In my view, flexible inflation targeting, as practiced in both Canada and the UK, has proven itself to be the most effective monetary policy framework implemented thus far”.
Whilst Mr Carney argued that because inflation had proved effective “the bar for alteration is very high”, but stressed it was important that “framework for monetary policy, rightly set by governments and not by central banks, is reviewed and debated periodically”.
Addressing concern about his position on the flexibility of inflation targeting and the potential government influence Mr Carney countered that there was “no question about [his] independence as governor of the Bank of England. There is a governance structure that has been put in place, there is an absolutely clear structure” and that no “political influence will come to bear on the execution of that remit”.
Regarding inflation Mr Carney further argued that the Bank of England was “very well informed on not just the conduct and the effectiveness of the current remit. The bank can play a role in informing that debate. If the bank were invited to question its remit, it is reasonable to respond.
“Active questioning of that remit can make it less effective. Once a remit is given then the bank’s job is to execute against that”.
Following Mr Carney’s remarks, widely seen as an early indication of changes to Bank of future England policy, sterling rose 0.4% to $15720.
As a member of the Bank’s governing body, the monetary policy committee, Mr Carney will be unable to decide any changes to inflation without agreement.
Mr Carney, recently considered a future leader of the Canadian Liberal party, dismissed concerns that he had political ambitions saying that if he did he would pursue them in Canada instead of taking the governorship of the Bank of England.
