Mark Carney's big mistakeNick Beecroft
The Bank of England's new governor, Mark Carney, is about to make a big mistake, according to Nick Beecroft, the Chairman of Saxo Capital Markets. That mistake is to issue forward guidance. On Thursday the Bank kept its interest rates at record lows and maintained its bond buying programme. It's expected to give more future policy details next week when it releases an inflation report.
Beecroft says the introduction of forward guidance is the right policy at the wrong time. In 2009, when Carney introduced it in Canada, it was appropriate given the crisis in the global financial markets. But now, says Beecroft, the economy is recovering strongly and the last thing people and businesses want to hear is a central bank coming out and saying the economy's still in bad shape and that interest rates need to be at record lows.
Beecroft goes further and says the Bank of England is risking its own credibility. He says the danger for Mark Carney and others is that he issues this guidance but by Christmas policy makers could well have to back-peddle because the economy is looking good.