World Economy

BOE: Unforgiving Global Forces Challenge Outlook

BOE: Unforgiving Global Forces Challenge OutlookBOE: Unforgiving Global Forces Challenge Outlook

Countries can’t count on other economies for growth as trade slows and emerging markets retrench, Bank of England Governor Mark Carney said.

“This is a pretty unforgiving environment,” Carney said during a panel discussion Thursday in Lima, where the International Monetary Fund is holding its annual meeting, Bloomberg reported. “Everybody needs to recognize there isn’t going to be a big surge of demand from abroad.”

The remarks highlight the tensions facing BOE officials as they weigh domestic strength against global turmoil. Minutes of the Monetary Policy Committee’s October meeting, published Thursday, signaled that a weaker inflation outlook gives room to keep the benchmark rate at a record-low 0.5%.

Emerging-market volatility and a worsening international environment were enough to prompt the US Federal Reserve to disappoint expectations that it would raise rates last month. Carney said the timing of the UK central bank’s first move won’t be determined by its American counterpart.

While the health of the US economy is “important to everybody,” the exact timing of the Fed’s move is not decisive for the BOE, he said. The UK central bank’s rate decision should come into sharper focus around the end of the year, Carney said.

Export Outlook

That’s been his line for months, even as global forces darken the outlook for British exports. Investors aren’t as convinced, with futures markets not fully pricing in a 25 basis-point rate increase until 2017.

The MPC’s minutes noted an “easing in the pace of activity” and said inflation, now at zero, should remain below 1% until spring 2016. Price gains have been below the bank’s 2% goal since the start of last year.

Against that, officials said there were few signs the emerging-market turmoil was having “a material effect” on confidence. They also pointed to signs of a tighter labor market, such as skill shortages.

The MPC will publish new forecasts next month and will reveal whether officials pushed back their August forecast for inflation to return to the 2% target in the third quarter of 2017.

“A deterioration in the global demand environment would slow the pace of expansion further,” the minutes said. “The committee will continue to monitor international developments, as well as evidence concerning the resilience of the domestic economy, to assess the outlook for inflation and activity.”