US economy

Bailey Signals BOE Has Abandoned Hard Guidance for Rates Policy


2/2

© Bloomberg. Andrew Bailey, chief executive officer of the Financial Conduct Authority (FCA), sits in the audience at the launch of the COP26 Private Finance Agenda in London, U.K., on Thursday, Feb. 27, 2020. In a world facing a climate crisis, investors need to start taking account of carbon emissions and rising temperatures in their decisions, according to Bank of England Governor Mark Carney.

2/2

(Bloomberg) — Bank of England Governor Andrew Bailey signaled that policy makers have effectively abandoned forward guidance as a way of guiding investors about the likely path of interest rates. 

Answering questions at Cambridge University, Bailey said there were three forms of forward guidance and the one that is currently in use is “not so much forward guidance as a reminder of where we are.”

Bailey said the system put in place in 2013 by his predecessor, Mark Carney, “is pretty hazardous (and) more hazardous in a more uncertain world.” 

In 2013, Carney told markets that the BOE would consider raising interest rates when unemployment fell to 7%. 

In place of that “hard” form of guidance, the BOE has recently been using softer “evidence” based guidance to provide an anchor for policy “in this world of greater uncertainty,” Bailey said.

“That’s a clear statement of intent to help people understand what we’re doing,” he added.

The current form of guidance is to “remind people of the policy framework.” He said markets had grown skeptical that the BOE was targeting inflation. 

“A lot of people think we are in the growth business come what may,” Bailey said. “We are in the price stability business. That’s not so much forward guidance as a reminder of where we are.”

 

©2021 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.