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Budget 2013: Base Rate plans to be revealed

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The Bank of England

Chancellor George Osborne announced in his Budget that the Bank’s new remit will retain the 2% inflation target but seeks to give incoming BoE governor Mark Carney more flexibility in his quest to support an economic recovery in the UK.

The MPC is to investigate the feasibility of publishing forward guidance on interest rates, a move already employed by the US Federal Reserve, and will publish its findings in the August Inflation Report.

“I want to make sure that an active monetary policy plays a full role in supporting the economy.

“[The new remit] makes clear that the Committee may wish to issue explicit forward guidance, including using intermediate thresholds in order to influence expectations on the future path of interest rates.”

“This can help the economy because it gives families planning their futures, and businesses wondering whether to invest, more confidence that interest rates will stay lower for longer.”

The new remit will also see a change to the time at which governor Mervyn King writes to the Chancellor about inflation in order to “allow for a more substantive exchange of views”.

Osborne added Carney and outgoing governor Mervyn King have both seen and agreed to the new remit.

Sterling briefly dipped on the announcement but was largely unchanged by the end of the Budget, trading at around $1.51 against the dollar.

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