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Carney to face MPs' questions

Published 14/07/2015

Bank of England governor Mark Carney is due to appear before MPs
Bank of England governor Mark Carney is due to appear before MPs

Bank of England governor Mark Carney is due to appear before MPs today - a day after Greece reached a last-ditch bailout agreement with European creditors.

Mr Carney said earlier this month that the outlook for UK financial stability had worsened as the crisis facing the debt-laden country deepened.

He is likely to face further questions from members of the Treasury Select Committee on the situation now a deal has been reached.

The 85 billion euro (£60 billion) rescue package for Greece, agreed after months of bitter wrangling, requires the country's parliament to pass a series of painful financial reforms days after its people rejected concessions in a referendum.

It staves off the immediate threat of a euro exit and financial collapse for the country, but experts have voiced caution, with ING Bank's Carsten Brzeski describing the deal as a "classic European fudge".

Mr Carney warned over the potential impact of the crisis as the Bank published its Financial Stability Report two weeks ago, a day after Greece missed a 1.6 billion euro (£1.1 billion) payment due to the International Monetary Fund (IMF).

He said the direct exposure of UK banks and businesses to the country was minimal, but added: "In contrast, our economic and financial exposure to the euro area is considerable."

Mr Carney said the Bank had been working with the Treasury, the Financial Conduct Authority (FCA) and authorities across Europe to draw up contingency plans.

The governor is also likely to face scrutiny over other aspects of the Financial Stability Report, which raised concerns about the risks that might be posed by the burgeoning buy-to-let market.

Mr Carney is also due be questioned about the Bank's latest quarterly Inflation Report, published in May.

The report saw the Bank slash its forecast for UK economic growth this year to 2.5% from 2.9% as well as cutting predictions for 2016 and 2017. It also downgraded hopes for rising wages.

Unveiling the report, Mr Carney saved his gloomiest language for the issue of productivity, which the Bank now thinks will grow even more weakly than previously thought.

His appearance before MPs comes on the day official figures are expected to show inflation continuing to hover around zero.

The Bank has predicted that the rate will pick up notably towards the end of the year as the effect of falling oil and food prices fades.

It has appeared to endorse market expectations that interest rates would not rise from the current level of 0.5% until the middle of next year.

Mr Carney's appearance will be the first since the general election returned a majority Conservative Government.

The committee remains chaired by Tory MP Andrew Tyrie but now includes newly elected members such as the Scottish National Party's George Kerevan and Labour's Wes Streeting.

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