It Ain't What You Do It's the Way That You Do It

Generali

Bantex wrote: »

Does that not sort of defeat the object of forward guidance if he has no direct control over it?

Sort of make it his personal wish list rather than a matter of policy.

Well Mr Carney is the Chairman of a committee which meets for a few days each month and all work for the same company.

Mr Carney can give forward guidance on the basis that, as chairman, he can reasonably say what he feels the consensus is on the committee. He can't, however, force anyone to vote in a particular way.

As chairman he also calls the vote so he could refuse to allow a vote on rate rises, in theory at least.

Generali

dotdash79 wrote: »

I doubt that Carney forward guidance has been written just by him without the rest of the MPC.

It's wage growth that will drive the decision to push rates up, once that starts to go up it will signal that capacity in the labour force is tightening.

That's my feeling. That and also the level of the pound. If the pound starts to fall quickly against the USD then I suspect interest rates could/would rise.

vivatifosi

BOE has just upped its growth forecast for 2014 to 3.4% from 2.8%. Something else that could impact. How strange it would be though to act to cool demand after the period we're moving out of.

vivatifosi

Generali wrote: »

That's my feeling. That and also the level of the pound. If the pound starts to fall quickly against the USD then I suspect interest rates could/would rise.

Pound has slowly nudged upwards this year. Interbank currently $1.655

michaels

vivatifosi wrote: »

BOE has just upped its growth forecast for 2014 to 3.4% from 2.8%. Something else that could impact. How strange it would be though to act to cool demand after the period we're moving out of.

Wow - 3.4% forecast almost deserves a thread of its own!

vivatifosi

michaels wrote: »

Wow - 3.4% forecast almost deserves a thread of its own!

I did think of starting one, but waiting for new heating system to be delivered, door could go any minute so don't have time to start. Over to you?

Generali

michaels wrote: »

What is the mechanism for that? - is it because funding the deficit will become harder or is it via Sterling weakness with 'hot money' outflows putting pressure on the exchange rate?

Generally the Bank seems to have been pretty clear lately that it is only (potential) inflaton caused by domestic supply pressures that concerns them, imported inflation from currency weakness or commodity price increases seems less of a concern.

(Although as an aside it would be interesting to see what would happen if overall prices were flat because falling commodity prices were offsetting rising labour costs...)

Inflows are needed to the UK to support the trade deficit. If tapering means the UK starts to see outflows like some emerging economies have seen over the past couple of weeks then that will have to be addressed.

tomterm8

Generali wrote: »

Well Mr Carney is the Chairman of a committee which meets for a few days each month and all work for the same company.

Mr Carney can give forward guidance on the basis that, as chairman, he can reasonably say what he feels the consensus is on the committee. He can't, however, force anyone to vote in a particular way.

As chairman he also calls the vote so he could refuse to allow a vote on rate rises, in theory at least.

As I understand it, Mr Carney gave forward guidance after a vote of the MPC and with the knowledge and consent of the treasury, and so it is settled policy.

Until circumstances change.

Which, they most probably will... certainly, after a general election.

Or a crises.

Thrugelmir

michaels wrote: »

Generally the Bank seems to have been pretty clear lately that it is only (potential) inflaton caused by domestic supply pressures that concerns them, imported inflation from currency weakness or commodity price increases seems less of a concern.

That's because the UK's largest trading partner the Eurozone is putting deflationary pressure on the UK economy. Slow down in emerging markets is merely reinforcing this.