View more on these topics

Next BoE governor Carney considers longer-term interest rates

Mark Carney 7 Feb Speaking

Incoming Bank of England governor Mark Carney has opened the door to fixing interest rates over a longer period rather than month by month.

Current Bank of Canada governor Carney gave evidence to the Treasury select committee last week ahead of his appointment as Bank governor on 1 July.

The monetary policy committee currently decides whether to raise, lower or keep interest rates the same at a monthly meeting chaired by the governor.

At the Bank of Canada in April 2009, Carney pledged that interest rates would not rise until the third quarter of 2010 conditional on a stable inflation outlook.

Carney said: “In the UK there is a valid discussion to be had about the potential use of this tool to provide additional stimulus when appropriate.

“It had a very important effect in that it reached over the heads of central bank watchers and financial markets to Canadians and sent a message that there would be stimulus for a period of time and borrowing would be available at unprecedented rates.”

Carney also confirmed he intends to start a debate on a radical overhaul of the Bank’s remit such as scrapping inflation-targeting. He is considering expanding its mandate to focus on growth, unemployment and inequality as well.

He said: “The bar for change is high but there should be a debate, a relatively short debate as I don’t think prolonged uncertainty about the framework is in anybody’s interest. We can then confirm the existing framework or change.”

John Charcol senior technical manager Ray Boulger says: “The more you commit yourself to hold rates the more exposed you become to unexpected events. The Bank would need enough leeway to change tack if it needed to.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment