“Q: Under what circumstances will interest rates go up ? ..So, what are the new rules ?
A: Well, the.. the essence of forward guidance hasn’t changed. At all. The essence of forward guidance is: the MPC won’t take risks with this recovery. Erm, and we will only raise interest rates when we think the economy is strong enough to withstand a rise in interest rates. What we said yesterday, the key message yesterday to companies and borrowers: yes, at some point interest rates will have to rise – but not yet and when they do rise they’ll only rise gradually and in a way that will continue to support the recovery and jobs, output and incomes.
Q: But you went from something quite simple – which is ‘keep your eyes on unemployment, and when that gets to 7% we’ll start thinking about interest rates’ to saying ‘we’re not really looking at anything at all, but just relax and be confident’.. It’s very nebulous - there’s no guidance at all, really.”
- Simon Jack interviewing Spencer Dale, Chief Economist at the Bank of England, on Radio 4’s ‘Today’ Programme, 13th February 2014.
I think this is “Much Ado About Nothing” from a financial press which thrives on bearish stories which make better headlines than good news.
However, Spencer Dale may wish that he had quoted John Maynard Keynes: “When the facts change, I change my mind. What do you do?”Back to top