Should Mark Carney Shut Up?

michaels

To be fair to the OP, the original forward guidance was based on an unemployment rate that it was thought would take a long time to hit and that when it would hit there would be inflationary pressures through wages. Getting the forecast wrong was not that unexpected (who gets economic forecasts right?) but some might say that failing to understand the linkage between unemployment rates and wage inflation is somethign the bank should not be getting wrong. Because it did get it wrong the guidance had to be amended so it was no longer 'if A happens I will do B' as it turned out A was not a proxy for inflationary peressure as had been anticipated.

However OP also seems to complain that the BOE forecasts are wrong which seems to be the case with the economy moving much further from the centre of those nice 'confidence fans' than random error would suggest was likely. So not so much foward guidance is a waste of time, more forward guidance based on innaccurate central projections is a waste of time.

worldtraveller

The pointless, ivory towered, city economists and analysts, be they BOE, or any other, generally got it completely wrong, before, during, and after the last recession. Why should that change now?

They are even now only just catching up with what's been going on, and has been obvious to those in the real world, commercial global economy, for the past few months.

Thrugelmir

lisyloo wrote: »

I really can't tell if this sarcasm.
But go on then - what use is consistently incorrect forward guidance?

No sarcasm I can assure you. There's more to the world than house prices. Interest rates are critical to many businesses. As often form a major cost. Whether to do or not do something will have the cost of borrowing money factored into the decision.

Thrugelmir

Generali wrote: »

Forward guidance is meant for the markets.

The importance of investment banking and related activities is rapidly diminishing. Forward guidance provides stability and generates confidence.

lisyloo

Thrugelmir wrote: »

No sarcasm I can assure you. There's more to the world than house prices. Interest rates are critical to many businesses. As often form a major cost. Whether to do or not do something will have the cost of borrowing money factored into the decision.

I agree with all of that.
What I don't get us how it generates confidence and stability when it has been laughably wrong and on the verge of incompetant.

Nick_C

Jon_B wrote: »

I fixed my mortgage for 5 years last year, so I am going to "lose"

You are going to carry on paying the rate you agreed to, and you have the certainty of knowing how much your repayments will be in two years time.

I took out a new mortgage last year, and decided on a lifetime tracker. I don't like the concept of fixed rate mortgages. By their very nature, they are a gamble. You take it out hoping that interest rates are going to rise soon, the banks selling it you are hoping they are not. The only certainty with a fixed rate mortgage is that you will be paying too much in the early part of the term.

My tracker mortgage may go sky high before your five year term is up, but as it is linked to base rate I have the certainty of knowing that whatever rate I pay, it will be fair.

purch

Mr Carney speaks too much, and say's too little.

The markets are clearly telling the BOE that they need to raise the Base Rate, and many of the economic indicators are showing the way too.

wotsthat

Nikkster wrote: »

I thought it was quite clearly a *guide* to what *might* happen going forward... as opposed to any kind of guarantee.

I just thought the BoE would be more accurate in said guidance than Graham_Devon and Wymondham.

I think forget the guidance. Let them make their decision once a month based on the latest data and forecasts available to them and provide full minutes as usual. I'd ban anyone on the MPC talking about the decision to the press - if anyone wants to brief they get the chance in the minutes and that's it.

chewmylegoff

michaels wrote: »

To be fair to the OP, the original forward guidance was based on an unemployment rate that it was thought would take a long time to hit and that when it would hit there would be inflationary pressures through wages. Getting the forecast wrong was not that unexpected (who gets economic forecasts right?) but some might say that failing to understand the linkage between unemployment rates and wage inflation is somethign the bank should not be getting wrong. Because it did get it wrong the guidance had to be amended so it was no longer 'if A happens I will do B' as it turned out A was not a proxy for inflationary peressure as had been anticipated.

However OP also seems to complain that the BOE forecasts are wrong which seems to be the case with the economy moving much further from the centre of those nice 'confidence fans' than random error would suggest was likely. So not so much foward guidance is a waste of time, more forward guidance based on innaccurate central projections is a waste of time.

Didn't the original forward guidance say we definitely won't raise rates before unemployment reduces past 7%, not once it fell to that level rates would definitely increase. It gave short term certainty that rates would remain the same but not a promise that interest rate rises would happen in the future. Perhaps I am remembering it wrong...

worldtraveller

wotsthat wrote: »

I just thought the BoE would be more accurate in said guidance than Graham_Devon and Wymondham.

I think forget the guidance. Let them make their decision once a month based on the latest data and forecasts available to them and provide full minutes as usual. I'd ban anyone on the MPC talking about the decision to the press - if anyone wants to brief they get the chance in the minutes and that's it.

Unfortunately, IMHO, like pretty much all city economists and analysts, who prattle on about the UK & global economy, they are generally at least 2-3 months behind the real world reality!

Mind you, I've been saying that for years! Does anyone listen?! Probably not!

However, check my posts if you want!