Bank of England's New Guidance on Interest Rates

The Bank of England risks losing credibility if it fails to stick its new interest rate policy, says Aberdeen Standard's Luke Bartholomew

Standard Life Investments 4 July, 2018 | 11:29AM

This article is part of Morningstar's "Perspectives" series, written by third-party contributors.

Mark Carney inflation Bank of England forward guidance interest rates

In his first act as Bank of England governor in August 2013, Mark Carney formally introduced forward guidance to the Bank’s toolkit. The Bank committed to not increasing interest rates at least until unemployment fell below 7%, at the time it was 7.7%. There are two important features of this form of guidance: first, it links policy to the state of the economy; second, it commits the Bank to a particular path of policy.

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