Knowing precisely when interest rates will rise is not “what really matters”, a senior Bank of England official said as she denied its system of “forward guidance” was failing.
The Bank’s latest forecast signalled a hike in the cost of borrowing may not come for a year despite governor Mark Carney previously saying the decision would come into “sharper relief” by now.
It suggested that while the UK economy was doing well enough in isolation to justify moving away from the record-low rate of 0.5 per cent, global instability meant it was not yet the right time.
Deputy governor Nemat Shafik yesterday defended the Bank’s failure to give any clearer signal as to when that would change and rejected charges it was failing to give promised advance notice.
“No, I don’t think that’s the case. Isn’t it better that the Bank of England give the public and the markets a sense of what our best collective judgment is of what is going to happen in the economy than to catch people by surprise?” she told BBC Radio. “The consistent message that we have given is that future interest rate rises will be limited and gradual and I think everybody on the monetary policy committee signs up to that guidance and so far that has proven to be right.
“Even though I understand why people are concerned about the actual date of the first rate rise, what really matters to the economy is the path, and the path will be limited and gradual.”
Shafik also suggested that there was no case at present for the policy of “People’s Quantitative Easing” advocated by Labour leader Jeremy Corbyn.