Mark Carney claims “this is not a debt fuelled expansion” and interest-rates will rise “sooner than markets expect” yet again!

One of the features of the credit crunch era is the way that those in authority so often get given pretty much a free pass from the media, This is illustrated starkly by the BBC’s senior economics correspondent Dharshini David.

Today the Bank of England’s Governor admitted to me that rates are likely to rise faster than the markets expect. So when can we expect the first move? My analysis for

Perhaps Dharshini was giddy after being given the first question at the press conference. Sadly she asked a question which might have been written by Governor Carney himself and accordingly he seemed like Roger Federer as he volleyed it nonchalantly at the net.

Missing is any questioning of the assertion such as pointing out Governor Carney told us that interest-rates would rise “sooner than markets expect” in his Mansion House speech in June 2014. When this did not happen he acquired this moniker.

The Bank of England has acted like an “unreliable boyfriend” in hints over interest rate rises, according to MP Pat McFadden. ( BBC)

The reality was that his next move was to cut interest-rates In August 2016 followed by promises of another cut that November before yet another U-Turn. Then there was another U-Turn just over a year ago which if you recall was followed by a sharp drop in the value of the Pound £.

So you can see that it is really rather extraordinary that Dharshini either ignored or is unaware of this. I am not sure what to make of the sentence below.

But that doesn’t mean that Mark Carney or his colleagues are asleep at the wheel.

She was nearer the mark with this.

Report press conference was perhaps unprecedented number of female hacks… taken a while but face of financial journalism is changing, all the better to reflect our audiences

However there was no mention of the “woman  overboard” problem at the Bank of England which was illustrated by the 100% middle-aged male make up of its panel. The press conference highlighted this as in response to a question about diversity at the Bank of England Governor Carney responded with a barrage of “ums” and “ers”.

Still we can have a wry smile at this.

Growth actually isn’t that different to what was expected a year ago……..UK growth in the first quarter is likely to have been 0.5%, double what the Bank expected just three months ago.

Governor Carney kept pointing to the former forecast as he had a rare opportunity to bathe in a correct forecast, although he was not challenged on why they then cut the growth forecast to 0.2% so recently?


In response to a rather good question about the growth of fixed-rate mortgages and its effect on the responsiveness of the economy to Bank Rate changes the Governor claimed this was nothing to do with him.  Nobody pointed out that in his first phase of Forward Guidance promising interest-rate increases there were people who were listening to him as there was a shift towards foxed-rate mortgages. Sadly, they were then shafted when Governor Carney cut interest-rates.

The point above was in a way the media catching up with one of my earliest themes from 2010 as I pointed out how market interest-rates were following official ones much less closely than before. However there was an even bigger humdinger out of Governor Carney’s mouth.

This is not a debt fuelled expansion

He has said this before and there are two main issues with this. The first is that the main policy over his tenure has been the funding for lending scheme which turned net mortgage lending positive. So more debt as shown by Wednesday’s figures.

Net lending for mortgages increased to £4.1 billion in March.

In the month before Governor Carney’s arrival the net increase was £785 million and whilst the rise has not been smooth ( early 2016 saw an incredible surge due to the buy to let changes) I think the numbers speak for themselves

Also the past three years or so has seen quite an extraordinary surge in unsecured credit something which I have been regularly documenting. It was £156.4 billion and is now around 38% higher at £216.7 billion. Can anybody think of anything else that has risen that fast as wage growth and GDP have been left far behind?

A factor in this has been something we have followed closely and was highlighted by the Office of Budget Responsibility.

 Data from the Finance & Leasing Association suggest that, between 2012 and 2016, dealership car finance contributed around three-fifths of the growth in total net consumer credit flows. Within that, around four-fifths reflected strong growth in car sales, with the remainder accounted for by a higher proportion of cars bought using dealership car finance.

So “this is not a debt fuelled recovery” means we have pumped up mortgage lending and seen quite a surge in car finance.


Sadly for those who parroted the Bank of England line there was this. From @NicTrades

Bank of England Carney signals more than 1 hike may be needed to keep inflation in Check, while at the same time he cuts inflation forecasts.

Thus according to its inflation targeting regime an interest-rate increase is less and not more likely. Even worse the absent-minded professor Ben Broadbent gave us quite a spiel on oil markets as he tried to look on the ball, but to anyone market savvy that will have backfired too as they will have been thinking that the oil price has been falling recently. The price of a barrel of Brent Crude Oil is as I type this nearly US $5 lower since President Trump indulged in his own open mouth operation on Twitter last Friday.


The era of Forward Guidance has turned out to be anything but for the Bank of England. Governor Carney seems to have set the boy who cried wolf as his role model and the fact that he has actively misled people gets mostly overlooked. Still let us hope he is right that UK GDP grew by 0.5% in the first quarter of this year. If true that will also pose a question for the Markit series of business surveys.

At 50.9 in April, up from 50.0 in March, the seasonally
adjusted All Sector Output Index revealed a return to growth for private sector business activity.

Meanwhile our supposed football fan missed an opportunity that was taken by the ECB.

Best of luck to our local team for tonight’s semi-final!

Perhaps I am more sensitive on that front as I am a Chelsea fan, but Arsenal fans may wonder too.



16 thoughts on “Mark Carney claims “this is not a debt fuelled expansion” and interest-rates will rise “sooner than markets expect” yet again!

  1. Hello Shaun,

    regarding “However there was no mention of the “woman overboard” problem at the Bank of England which was illustrated by the 100% middle-aged male make up of its panel.”

    replacing a bunch of yes men with yes women is no solution

    we need one who is not a yes man……


    • Diversity is required only in the make-up of bodies espousing solutions to social problems.
      It’s purpose is solely to justify the solutions themselves, which must only be drawn from establishment-approved dogma.
      That’s why it doesn’t really matter if the MPC, or indeed the HoP is all male, all female, or all one-legged East Timorese lesbians.

  2. Hello Shaun,

    some news from the property situation in the SE Surrey . From my observations of asking and selling prices and those who I know ( yes including me ) who finally sell …….

    looks like 13% drop from last year

    yikes ! ok this is a small survey and probably not representative – unless other readers have some input?

    I think Carney can smell the fear ( or would that be blood ? )

    perhaps later on the title of your article will go from

    “this is not a debt fueled expansion”


    “this is not a debt fueled crash”.


    PS: I wonder what happened to Canada’s housing market after Carney left?

    • Carney’s a gonna. He knows he has made away scot free for his words yesterday. A kind of echoing epitaph, I always said I was going to raise, you lot listened, you lot were mesmerised, you were “had”. Now I am scot free with 6x£840K and free accomodation…for all those years. Your country is riddled with debt and …I am gone…… phut.

    • It’s a bit anecdotal but the prices up north seem to be rising as people down South are relocating and taking profits from the home down south either through selling or renting out and living on the arbitrage. I’ve seen some extreme examples of this where people have relocated from Sussex and Greater London and moved to North Wales or the cheaper parts of the North West and basically don’t have to work.

      The young down south just cannot afford a thing so that wil be pulling a pillar from the prices so if we reduce the number of well off people moving over from abroad for work them I don’t see where the money will come form. Two different home owners can of course swap houses and the price doesn’t really matter but prices paid by those without any household equity cannot hold at their current value.

  3. Dear Mr Carney,

    If It’s not a debt fuelled expansion and there is indeed an expansion, then what is fuelling it?

    If the debt is not fuelling the expansion and there is indeed lots of debt then what is it fuelling?

    • House of cards and they always collapse at some stage.

      Borrowings are climbing and far in excess of growth, this is unsustainable and most on this forum agree.

  4. Hi Shaun

    Great article as always. We need you to keep Carnage to account.

    Have you not been tempted to go to one of these press conferences yourself? Or, do only the select few get invites. Probably based on the paucity of their questioning.


    • Hi anteos and thank you.

      It is not so much getting in as for example I could probably have used Mindful Money back in the day for leverage and an entry ticket. The catch is that the Bank of England controls who asks the questions. So at best I would only ever get one!

  5. And so the farce continues, with the press giving him a free ride every time, you now have the farcical situation where Carney states that if growth is above 1.5% in 2020 and 2021:

    “If something like the forecast comes to pass, it will require interest rate increases over that period [two years] and more frequent than financial markets currently expect,”

    And yet at the same time the Bank’s Monetary Policy Committee stated in its quarterly inflation report that it would restrict the pace of interest rate rises over the next two years to NO MORE THAN A QUARTER PERCENT, due to uncertainty over BREXIT.
    Note the words of Carney -INCREASES – plural – and “more frequent”.

    So just like his promise to put up rates when unemployment fell below his trigger point of 7%, we’ll wait him to be proved a liar once again.

    • Hi Kevin

      The episode which was most glaring was the summer of 2014 one which led to the “unreliable boyfriend” moniker. But more seriously it led to substantial shifts in financial markets with the UK Pound £ rallying as did UK Short Sterling futures ( for those unaware that is what UK interest-rate futures are called), and in addition to that volumes were high. It is easy to think that is just financial market speculation but on the back of a clear tip from the Governor pension money was invested and people incepted fixed-rate mortgages.

      What happened? Nothing for ages followed by a cut….

      As to the 7% unemployment rate the Bank of England now thinks the equilibrium unemployment rate is 4.25% in what we shall politely call an example of high intellectual flexibility.

  6. Great blog as usual, Shaun.
    Yes, it was a good question posed about the growth of fixed-rate mortgages in the UK, something I was quite unaware of. From Table 1.C of the Inflation Report it appears that the fixed-rate mortgage rate for a two-year term with a 75% LTV only had a 7 basis point premium on the corresponding variable rate mortgage, while in July 2018, if I understand it correctly, it would have been 21 points, so it is not surprising perhaps that the fixed –rate mortgages have become more popular. Off topic from monetary policy, but it is too bad in calculating the experimental HCIs that the average mortgage rate is calculated as a weighted average of the different rates, with annual updating of the weights. If I understand correctly, a shift in market share from a lower variable rate to a higher fixed rate by UK mortgage holders is not treated as a price increase, in and of itself, but shouldn’t it be?

    • Hi Andrew and thanks for the link.

      The changing situation regarding UK fixed-rate mortgages is highlighted below.

      As to your question I will have to read up on the new HCI proposal but initially I agree,

  7. Hi Shaun,
    Truely unbelievable.
    So — The rock star banker is only as good as his (or her!) last performance All pervious performances count for nothing.

    The problem is all of this rock star’s performances, including hid latest, have turned out to be not very good at all.

    Asleep at the wheel! They’re all sitting in the back seat with the BBC -and the rest- having a jolly good time at our expense.

    I can’t find any appropriate words from Lewis Carroll. It’s that bad.

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