Mark Carney’s tiny step in the right direction

I have an oped in UK’s City AM on Bank of England’s new forward guidance regime. Yes, I am disappointed…

ALMOST everyone will be disappointed by governor Mark Carney’s announcement yesterday. Those hoping the Bank of England would announce more monetary easing will feel let down. And while those of us hoping for strictly rules-based policy do have something to be happy about, Carney needed to go much further.

The Bank has now spelled out its own version of the Federal Reserve’s Evans Rule. The “Carney Rule”, as we might call it, implies that the Bank will commit itself to maintaining interest rates at the present level as long as unemployment is above 7 per cent, and the Bank’s inflation forecast is below 2.5 per cent….

Read more here

PS Mark Carney tightened monetary policy yesterday. Just look at the pound (it strengthened) and the UK stock market (it dropped). So those who fear that inflation is about to get out of control in the UK are very wrong.

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  1. Chris Papadopoullos

     /  August 8, 2013


    I think Carney might actually get lucky and take the credit for it. Just before he took over the BoE released its first healthy M4X growth for years so the economy may well improve this year. Unless you think that would already be reflected in markets?

    • Chris, I agree. Given the present monetary conditions we are likely to continue to see a gradual improvement in the UK economy. However, there is nothing that is point to a swift or strong recovery and in fact Carney has move or less promised that he will tight monetary policy if the recovery gets much stronger by setting is “target level” for unemployment has high as 7% rather 5 or 6%.

      I believe a moderate recovery with no really inflationary pressures is what is presently priced by the markets.


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