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Ex-BoE boss Carney says UK tax cuts complicate BoE inflation fight

Analysis-Under water: how the Bank of England threw markets a lifeline
Analysis-Under water: how the Bank of England threw markets a lifeline Copyright Thomson Reuters 2022
Copyright Thomson Reuters 2022
By Reuters
Published on Updated
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LONDON -Former Bank of England governor Mark Carney criticized the new British government's plan to cut taxes for undercutting efforts by the central bank to curb inflation and for sowing chaos in financial markets.

"Unfortunately having a partial budget, in these circumstances - tough global economy, tough financial market position, working at cross-purposes with the Bank - has led to quite dramatic moves in financial markets as we have all seen," Carney told the BBC in an interview broadcast on Thursday.

Last week, finance minister Kwasi Kwarteng followed through on Prime Minister Liz Truss's promises of tax cuts by announcing further reductions in taxation without detailing the impact on the public finances or explaining his economic growth plans.

The pound sank and British government bond yields soared, forcing the BoE to revive its bond-buying in an emergency move on Wednesday to shore up pension funds.

Carney said the government was right to focus on getting Britain's economy to grow more quickly but that ambition remained for the future and in the short term there was confusion about how the public finances were going to add up.

The lack of an assessment by Britain's budget watchdog, the Office for Budget Responsibility, was a concern for investors, the Canadian who ran the BoE until 2020 told the BBC.

"It's important to have (the budget) subject to independent and dare I say expert scrutiny," Carney said.

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