24 Jan 2014
BoE's Carney: MPC to consider adjustments to forward guidance in February
FXstreet.com (Łódź) - Bank of England governor Mark Carney declared today at the World Economic Forum in Davos that the central bank would not carry out an interest rate hike in the nearest future, as there was "no immediate need” for such a move.
“Even though unemployment is falling faster than expected, the recovery has some way to run before it would be appropriate to consider moving away from the emergency setting of monetary policy,” Carney suggested.
This week the UK unemployment rate has almost reached the 7% threshold established by the BoE as a point for reassessing monetary policy, falling to 7.1% on Wednesday. But the governor stressed that the economy needed time to strengthen further, before a tightening could be carried out. He signaled that the MPC would look at a “range of options” for updating the forward guidance at the upcoming meeting.
Marc Chandler, Global Head of Currency Strategy comments: “In fairness the Carney has long maintained that thresholds are not triggers. It did its function and now the forward guidance, which we suggest is a communication policy not monetary policy, needs to be adjusted as the threshold has been approached. While we have cast a jaundiced eye toward the hype about forward guidance, but we think the claims that the BOE is abandoning it, or that is has been a failure, is a gross exaggeration.”
“Even though unemployment is falling faster than expected, the recovery has some way to run before it would be appropriate to consider moving away from the emergency setting of monetary policy,” Carney suggested.
This week the UK unemployment rate has almost reached the 7% threshold established by the BoE as a point for reassessing monetary policy, falling to 7.1% on Wednesday. But the governor stressed that the economy needed time to strengthen further, before a tightening could be carried out. He signaled that the MPC would look at a “range of options” for updating the forward guidance at the upcoming meeting.
Marc Chandler, Global Head of Currency Strategy comments: “In fairness the Carney has long maintained that thresholds are not triggers. It did its function and now the forward guidance, which we suggest is a communication policy not monetary policy, needs to be adjusted as the threshold has been approached. While we have cast a jaundiced eye toward the hype about forward guidance, but we think the claims that the BOE is abandoning it, or that is has been a failure, is a gross exaggeration.”