2017.02.2107:56:00UTC+00BoE Will Not Hesitate To Change Policy If Necessary, Says Carney

The Bank of England will not hesitate to change policy if deemed appropriate, Governor Mark Carney said at a parliamentary committee hearing on Tuesday.

The BoE Chief defended the bank's estimate on unemployment when Andrew Tyrie, the chairman of Parliament's Treasury Committee, questioned the bank's estimate of spare capacity.

The bank had lowered its jobless rate forecast earlier this month. Carney said unemployment could fall before it starts to push up inflation.

A sharp rise in market interest rates, in expectation of the bank rate being raised in the near future, would tighten credit conditions and potentially hit both consumer spending and business spending, Andrew Haldane, BoE's chief economist, said.

Haldane said the errors in the BoE's forecast since 'Brexit' were not of the same scale as seen at the time of the financial crisis in 2008.

Data published by the Office for National Statistics on Tuesday showed that the January budget surplus was the highest since 2000.

Public sector net borrowing, excluding public sector banks, showed a surplus of GBP 9.4 billion, which was GBP 0.3 billion larger surplus than in January 2016. However, this was below the expected level of GBP 14 billion.

The weak result was mainly due to a change in the way that the ONS measures corporation tax revenue, Scott Bowman, a UK economist at Capital Economics, said.

In the current financial year-to-date period, PSNB excluding banks, dropped by GBP 13.6 billion to GBP 49.3 billion, the lowest year-to-date borrowing since the financial year-to-date ending January 2008.

He said the borrowing is on track to come in around GBP 10 billion below the OBR's November forecast of GBP 68 billion for the 2016/17 fiscal year.

The Chancellor of the Exchequer Philip Hammond is set to present his annual budget on March 8.