Has the market misinterpreted BoE Governor's intentions?

Bank of England Governor Mark Carney is an advocate of the virtues of communication, but he may have already backed himself into a corner in his attempt to set out a clear policy path.

Last week, the BoE announced its commitment in the latest Quarterly Inflation Report to hold interest rates until unemployment falls back to the 7% mark. Initial uncertainty following the release of the report centred on the wiggle room the Bank has given itself on inflation – but even this point may have been misinterpreted. In one of the caveats to its ‘forward guidance’, if the Monetary Policy Committee forecasts inflation to be 0.5 percentage points above target on an 18-24 month view then the guidance is moot. This has led many to label the guidance as less accommodative than ...