Bank of England not biased on Brexit says governor Mark Carney

Jasper Jolly
Follow Jasper
Bank of England governor Mark Carney told the House of Lords the likelihood of a disorderly Brexit was lower (Source: Getty)

The Bank of England is not biased towards any particular outcome of the Brexit process, its governor, Mark Carney, told the House of Lords today.

Top officials at the Bank, including Carney and deputy governors, have previously warned that leaving the EU without a deal could cause economic damage, and have pushed for a transitional deal to cover UK/EU trade until a trade agreement is struck.

"We don’t have a bias, in terms of the outcome," Carney told the economics committee at the House of Lords, according to Reuters. "We look at the economic forces... however the negotiations go... how it affects the exchange rate, how it affects the supply side of the economy, and how it affects demand.”

Read more: Mark Carney expects "conscious recoupling" of the UK with global economy

The danger of a "disorderly Brexit", in which the UK and EU cannot agree a trade deal, has become "less likely", Carney said. Once the UK gains certainty in the Brexit process it will boost business investment, he added.

Meanwhile, Carney also made a rare intervention into the discussion around the UK's inflation measures. He called for a single main measure for UK inflation, which would likely involve the sidelining of the consumer price index (CPI) measure, as well as the much maligned retail price index (RPI). The Office for National Statistics' preferred index for price rises, CPIH, includes housing costs.

Read more: DEBATE: Is it time we scrapped the RPI index as a measure of inflation?

Carney's comments could eventually pave the way for the Treasury to change the Bank's mandate to target CPIH, although the governor insisted he was not doing that "at this stage" because of the lack of reliable track record.

However, he did call for RPI to cease to be the main measure for the UK's index-linked bonds. RPI, which is acknowledged to be a poor measure of the cost of living, is nevertheless used to benchmark government borrowing. As RPI is generally higher than CPI a change could provide a fiscal boost to the government, which would have to pay less to bondholders.

Read more: Bank of England says Brexit trade deal with financial services is doable

Related articles