Carney to reassure borrowers rates will stay low for months
The new governor is set to outline a plan for ‘forward guidance’, the centrepiece of his reforms to UK monetary policy in the Bank of England quarterly Inflation Report due to be released on Wednesday, according to the Mail on Sunday.
This will mean the Bank’s Monetary Policy Committee will not just set interest rates, but specify conditions under which rates would rise.
Most analysts expect future rises to be linked to unemployment levels.
Carney (pictured) used forward guidance at Canada’s central bank and was asked by the Chancellor to outline how it might be used in the UK.
Howard Archer, economist at IHS Global Insight, said: ‘We are convinced the Bank will formally adopt a policy of forward guidance. We believe the Bank of England will adopt economic thresholds to support this policy, very possibly relating to unemployment.’
The Bank left the base rate at 0.5% at its meeting last week, and experts expect it to stay unchanged for 18 months.
Regulators are anxious that fears of a rate rise could cause households to rein in spending, stalling the nascent recovery.