Oil: The Supply Shock Which Isn’t There
Carney on supply shocks at the Financial Stability Report yesterday when asked a question about “oil price risk and deflation risk”:
Mark Carney: Yeah. The – in terms of oil, I mean, this is a net positive development. I went through some of the channels of risk in my remarks – geopolitical, uncertain high yield issuers and then this deflation point, which I’ll expand on.
But I think we should be clear that the 40% plus drop in the oil price will flow quite quickly through to consumers; it will increase real disposable income; it’s a net positive for the UK economy. And the relative exposure – the relative exposure – of the UK financial system to the energy complex is manageable. And so unambiguously – net positive.
I asked this before but I’ll ask it again. Who is upgrading their forecast for UK real GDP growth in the light of falling oil prices? The Treasury’s helpful comparison of independent forecasts came out today, and that upgrade is not showing up yet.