Friday 22 September 2017

Next Bank of England deputy warns on Brexit and spending risk

The Bank of England’s new Deputy Governor Charlotte Hogg. Photo: PA
The Bank of England’s new Deputy Governor Charlotte Hogg. Photo: PA

Scott Hamilton

Bank of England Deputy Governor-designate Charlotte Hogg said that Brexit and a sharp drop in consumer spending pose some of the biggest risks to the UK economy, as she faced questions about potential conflicts of interest.

UK household confidence weakened this month, and BoE policy makers expect real incomes will be eroded as the slump in the pound boosts inflation above its 2pc target. That's a threat to consumption, one of the main pillars of the economy recent strength.

"Households are beginning to face a squeeze on their incomes," Hogg said in a questionnaire published alongside her appointment hearing in London on Tuesday. "The MPC's current forecast assumes steadily slowing growth in consumption, facilitated by a continued fall in the savings rate. But I can envisage scenarios in which the reaction of consumption could be more sudden."

Hogg will replace Minouche Shafik as deputy governor for markets and banking as well as keep her role as chief operating officer. That remit, which includes voting on interest rates, gives her the widest powers of any of Governor Mark Carney's deputies. She will be one of just three officials on all the BoE's key committees for monetary policy, regulation and financial stability.

Ms Hogg's links to British politics became part of the hearing, with Chairman of the UK Parliament's Treasury Committee, Andrew Tyrie, noting he knew her grandfather.

Her father, Douglas, served in the governments of Margaret Thatcher and John Major, her mother, Sarah, was an adviser to Major, while her grandfather and great-grandfather were both lord chancellors.

Later in the hearing, Conservative MP Jacob Rees-Mogg said while he was at Eton, her grandfather addressed students in Greek at his invitation. Hogg's response that she wouldn't do her hearing in Greek prompted a comment of "Oh relief, thank you," from Rees-Mogg.

The family links also were the grounds for questions about conflicts of interest as Hogg's brother is a director at Barclays. Hogg said she had always declared potential issues to the bank and is in "compliance with all the codes of conduct." She also said it's a possibility that she would excuse herself from some discussions on Barclays.

The start of her five-year term on Wednesday heralds a period of flux for the Monetary Policy Committee, with Chief Economist Andy Haldane's three-year term up for renewal at the end of May, and Kristin Forbes already intending to leave a month later.

In her questionnaire, Hogg said uncertainties surrounding the UK's exit from the EU pose upside and downside risks.

She also said her experience at consumer credit businesses has made her "very sensitive" to how quickly information (right or wrong) can be shared and how quickly customers could take action as a result".

A report yesterday found the UK sentiment index fell in February, and the appetite for major purchases decreased. (Bloomberg)

Irish Independent

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