Douglas Carswell, Brexit, and the BoE’s independence

I saw on Twitter today that Douglas Carswell responded to the March MPC minutes, which revealed that the Committee thought that uncertainty about the outcome of the referendum on EU membership had caused Sterling to fall, and may be depressing demand.  He Tweeted:  ‘Chancellor’s appointees agree with Chancellor:  shock.’

I have absolutely no beef whatsoever with the minutes opining like this.  But I do wonder whether the BoE’s previous interventions [the published report on EU membership, and Carney’s exchanges at TSC] have contributed to comments like this.

It’s pretty depressing to read that a prominent politician concludes that there is a conspiracy to subvert Bank of England independence, based on almost no evidence, and on a point that ought to be entirely uncontroversial.

Whatever one thinks about the long-term consequences of exiting the EU or not, the short-term effects of the uncertainty about our EU membership are not at all difficult to fathom, and the MPC reached exactly the right conclusion [as I wrote here for the Independent].

Carswell’s response to me was to urge that the views of economists be discounted, on the grounds, I think, that we are prisoners of our vested interests and predetermined ‘function’ in the political/bureaucratic process in which we operate.

Well, maybe.  But down that road leads to utter nihilism, including the observation that politicians themselves issuing that advice should be ignored.  Economists come in many varieties, academic or not, public or private sector, independent or corporately affiliated.  I’m sure the overwhelming majority would agree on what uncertainty about our future EU status would do to Sterling, and demand, and the MPC view reflects this.

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3 Responses to Douglas Carswell, Brexit, and the BoE’s independence

  1. BRaven says:

    Yet, GBPUSD is up ~3.5% since your Independent article and if anything the market price of Brexit is higher.

    • Tony Yates says:

      Only the impact effect cleanly identifies the news. Since then al kinds of other news has come in.

      • BRaven says:

        Plenty of other news over the period (imho UK inflation and interest rate expectations have been more meaningful), and lots of other asset prices that didn’t show Brexit risk. Carswell’s dismissal of economic opinion was weak because he unfairly inferred there was bias.

        I chuckle when I hear other traders explaining a market move because it is pretty much impossible to have any certainty or infer the motives and thinking of thousands of participants with so little data. Particularly with fx where you have two economies to consider and you often see the market shift as to which ‘fundamentals’ it responds to.

        I don’t mean to sound rude, but shouldn’t you express a bit more uncertainty?

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