Why the 'Carney cure' may not deliver

Carney cure

November 2012, and Chancellor George Osborne announces Mark Carney as Sir Mervyn King's successor as Governor of the Bank of England. Since then, the Chancellor has also outlined a wider monetary policy remit for the Bank.

While 2% inflation remains the central target, Mr Carney can now deploy new tools to boost the economy, including forward guidance on interest rates; tolerating above-target inflation for longer, and he has the freedom to explore additional targets such as GDP growth and lower unemployment. It all sounds most promising in theory, but will the ‘Carney cure’ deliver in practice? Since 2008, the Bank has cut interest rates to ultra-low levels (0.5%); has injected £375bn into the economy through quantitative easing (QE), and has demonstrated a benign neglect towards inflation, having missed ...