Belfast Telegraph

Mark Carney lets loose on Wild Wednesday

By David Elliott

Bank of England governor Mark Carney probably spent much of yesterday quoting John Maynard Keynes.

"When my information changes, I alter my conclusions. What do you do Sir?", the famous economist (Keynes, not Carney) was heard to reply to criticism of a change in his position on monetary policy during the Great Depression.

Mr Carney could credibly use this phrase to answer critics of his U-turn on forward guidance relating to interest rate policy.

On the day which was labelled Wild Wednesday – ostensibly for the state of the weather – Mr Carney threw himself free from the shackles of unemployment and went as wild as anyone charged with holding the nation's purse strings can.

He did away with the 7% unemployment target, the level at which he had said the central bank would move to raise interest rates from the current level of 0.5%.

Now Mr Carney and the Monetary Policy Committee (MPC) is going to use other economic indicators to hint at the right time to raise rates.

He's claiming that still equates to a version of forward guidance but there's no doubt its a very much watered-down version rather than the concentrated.

Essentially they'll be using a well-read hunch in relation to when is the right time to raise rates, something you can't help thinking brings us back to the fundamentals of rate setting and which is not dissimilar to that used by many MPC committees before.

All-in-all we seem to be back to where we were.

Whether that's a good thing or not only time will tell.

Belfast Telegraph