Will he stay or will he go?
It’s been a relatively slow start to trading on Tuesday but things are expected to pick up, with Bank of England Governor Mark Carney making an appearance shortly and the US and Canada returning from the long bank holiday weekend.
Carney’s appearance before the Treasury Select Committee on Tuesday comes with an additional twist, following reports that the Treasury is trying to persuade him to extend his term – which ends in the middle of next year – by another 12 months. Carney has already agreed to one extension in order to oversee the Brexit process and the government is clearly hopeful that he will contemplate one more so as to provide some source of stability in otherwise uncertain times.
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It will be interesting to see whether Carney chooses to entertain questions on these negotiations or instead brushes them off for another day. He hasn’t been the most popular of Governor’s, primarily among Brexiteers, who are still angry about his predictions on the economy prior to the referendum in the event of a vote to leave. You have to wonder why Carney would choose to remain in the hot seat given the hand he’s been given and the constant criticism he’s received. Perhaps this is one reason why efforts are being made to retain him for now, it can’t be one of the most sought after jobs at the minute.
How reliable are UK projections with Brexit on the horizon?
While Carney’s potential extension may provide a distraction during the event, the main purpose of the inflation report hearing is to discuss the latest quarterly report put out by the Bank of England on the economy. In August, the Monetary Policy Committee deemed it appropriate to raise interest rates by 25 basis points, taking interest rates above 0.5% for the first time since the start of 2009, despite the fact that the economy is only growing at a moderate rate and faces numerous risks heading into a hugely important few months for Brexit.
The hike was accompanied by an acknowledgement that future hikes will be gradual and that inflation is expected to return to target over the coming years. More importantly, they are based on the assumption of a smooth Brexit process, something that looks quite hopeful based on how negotiations are progressing which I expect will be questioned in detail today. As ever, it’s likely to be a lively affair.
The US will also be back in focus today as the country returns from the Labor Day bank holiday. As ever, traders will be paying close attention to the political situation with Donald Trump seemingly at the centre of many things that are dominating the space right now. The inability to get a renegotiated NAFTA over the line last week was a setback for the US President ahead of the mid-terms and I expect to hear plenty more about this in the coming days and weeks. We’ll also get the ISM manufacturing PMI from the US today.