Monday 16 January 2017 6:56 pm

Bank of England governor Mark Carney claims stimulus package in August saved 250,000 jobs from being lost

By: Francesca Washtell and Julian Harris

Mark Carney has been slammed by leading Brexiteers after claiming that 250,000 jobs could have been lost if the Bank of England had not taken action in the aftermath of last year's EU referendum.

Bank governor Carney slashed rates to 0.25 per cent in August last year, while expanding the UK's quantitative easing programme and providing a new funding scheme to absorb post-referendum nerves in the banking sector.

"Suppose the MPC [monetary policy committee] had not responded in this timely, coherent, and comprehensive way… given the constellation of shocks affecting the economy, opting not to provide monetary stimulus would have meant, in all likelihood, inflation around the target at the two-year point of the forecast, but an output gap of some 1.5 per cent, implying around one quarter of a million lost jobs," Carney told an audience at the London School of Economics.

A number of high-profile Leave campaigners leapt on the comments.

"This self-serving vanity is remarkable, Mark Carney predicted a disaster that didn't happen and now says it was only avoided because of his own brilliance," Treasury Select Committee member and Tory MP Jacob Rees-Mogg told City A.M.

Brexit-backing economist Gerard Lyons described the figure as "remarkable", adding that it "looks high", while Tory MEP Dan Hannan said "to claim that it was the BoE that saved these jobs borders on narcissism".

However, board member at the Centre for Economics and Business Research and former government economics adviser Vicky Pryce said there might be some truth in the claim.

"Mark Carney is probably right [that 250,000 jobs were saved]," Pryce said. "The fact that we've been growing and creating jobs rather than losing them has been to a large extent down to the Bank of England's actions.

"The BoE was the only part of the institutional framework that actually stepped in to calm the market to assist growth after the referendum, by injecting liquidity into the market, keeping interest rates low and in the process also keeping the pound low, which has helped exports and manufacturing more generally."

Carney also warned over the potential effect of rising inflation on UK growth in the near future.

"Over the next few years, the magnitude of the effects of this [Brexit's] adjustment on the economy's supply potential, domestic demand, and the value of of sterling will be somewhat uncertain; and this process will have a significant bearing on inflation," Carney said.

He added: "In November, the MPC reiterated that we were choosing a period of somewhat higher consumer price inflation in exchange for a more modest increase in unemployment. But it also noted that there are limits to the extent to which above-target inflation can be tolerated."

Due to the uncertainties presented by Brexit, Carney said the next move in interest rates could go "in either direction", up or down. Overall, his speech appeared to be more hawkish than expected; UK households seem to be "entirely looking through Brexit related uncertainties", he said, warning against a reliance on consumer-driven growth.

"High inflation hurts those, particularly the worst off in society, who don't hold equities or property as well as those whose incomes are fixed in nominal terms. It distorts price signals, inhibits investment, and can ultimately damage the productive potential of the economy," he said.