LONDON (Reuters) - Mark Carney will give markets guidance on monetary policy soon after he takes over as Bank of England governor next month, according to a Reuters poll that also predicted an end to asset purchases.
Carney, a Canadian, takes the wheel from Mervyn King at the start of July and according to the majority of respondents in the poll of over 40 economists who answered an extra question one of his changes will be to give markets a steer on policy.
“To show he is a man of action, we expect Mr. Carney to introduce explicit forward policy guidance in August,” said Simon Wells, chief UK economist at HSBC.
“The UK economy seems to be improving. But we’ve had several false dawns before - weak demand means the new BoE governor faces familiar challenges.”
With an economy stuck in a rut for over two years the Bank has printed 375 billion pounds of money through bond purchases but the poll gave only a median 45 percent chance that it would top up its asset-buying quantitative easing program.
King has been in the minority calling for additional quantitative easing and with bright spots beginning to emerge the probability of the printing presses being restarted has steadily declined.
Carney’s fondness for bond purchases is uncertain.
Official data released late last month showed the economy grew 0.3 percent in the first three months of the year and business surveys have pointed to a solid start to the second quarter. <GB/PMIS>
Growth is seen between 0.3 and 0.5 percent per quarter through to the end of next year in forecasts little changed from last month’s poll.
“The UK is now on a recovery path, but the risks still lie to the downside and the new governor will want to avoid appearing complacent over the outlook,” said Philip Shaw at Investec.
The poll suggested Britain’s economy will expand slightly more than previously thought this year, with growth seen at 0.9 percent - a marginal improvement on the 0.8 percent forecast last month. The 2014 forecast was unchanged at 1.5 percent.
The majority of the Bank’s monetary policy committee have been concerned about inflation, which at 2.4 percent in April was well above the Bank’s 2 percent target. The poll shows it averaging 2.7 percent this year and 2.3 percent next, slightly down from last month.
As in all recent polls no change is expected for the benchmark Bank Rate from its record low of 0.5 percent until 2015 at the earliest.
Polling by Ashrith Doddi and Ruby Cherian Editing by Jeremy Gaunt