26 Nov 2013
BoE's Carney defends forward guidance policy
FXstreet.com (Barcelona) - BoE Governor Mark Carney, who testified before the UK parliament’s Treasury Committee on Tuesday, reiterated that the fall in the unemployment level to the 7% threshold would not automatically trigger a rate hike.
He suggested that forward guidance was mainly a way of communicating under what conditions the BoE would start considering an increase in rates, which gives market participants, companies and households more certainty.
“We are not going to pull the rug out from under the recovery before it gets going,” Carney stressed, adding that it is very difficult to predict how will the unemployment situation develop further.
Nevertheless, the BoE governor welcomed the recent surprising improvements in the UK labor market, which he saw as evidence of the recovery gaining momentum. He stressed however that the level of slack in the economy should not be underestimated as well as the downside risks to the outlook for the Eurozone, which could still hurt UK growth.
Another topic discussed was the UK Treasury's request for the BoE to review the leverage ratio imposed on UK banks. Mark Carney found it necessary for maintaining a resilient capital framework in UK and said that the new rules should be implemented within nine months.
He suggested that forward guidance was mainly a way of communicating under what conditions the BoE would start considering an increase in rates, which gives market participants, companies and households more certainty.
“We are not going to pull the rug out from under the recovery before it gets going,” Carney stressed, adding that it is very difficult to predict how will the unemployment situation develop further.
Nevertheless, the BoE governor welcomed the recent surprising improvements in the UK labor market, which he saw as evidence of the recovery gaining momentum. He stressed however that the level of slack in the economy should not be underestimated as well as the downside risks to the outlook for the Eurozone, which could still hurt UK growth.
Another topic discussed was the UK Treasury's request for the BoE to review the leverage ratio imposed on UK banks. Mark Carney found it necessary for maintaining a resilient capital framework in UK and said that the new rules should be implemented within nine months.