2.30pm, Wednesday 12 February: MBS’ banking expert, Ismail Erturk, comments on changes to the Bank of England’s forward guidance – dropping the 7% unemployment threshold for interest rate rise considerations in favour of a variety of assessments.
“Mark Carney has formally announced that unemployment target of 7% is no longer a threshold for interest rate increases, and therefore the forward guidance as we know it is dead and buried. This is an implicit admission that central bank policies are based on shifting sands, and not on the solid foundations required to build a strong economy. Why should anyone now believe that Mark Carney’s new targets are reliable indicators of robust and sustainable economic growth?
“What we are observing is the beginning of the decline of public and business trust in central bankers. The recent turmoil in emerging economies dented the US Federal Reserve’s reputation, as Federal Reserve could not anticipate the disruptive effect of its tapering. Despite this, the message to the dysfunctional banking sector in the UK – and to the bankers who still pay themselves unfairly high bonuses – remains that central banks will continue to subsidise them with unlimited liquidity and very low interest rates.
“As a consequence, the Bank of England will also encourage debt rather than savings. This is not good news for long-term health of the UK economy, as we now observe the emergence of a twin housing and stock market bubble.
“Mark Carney has lost control of the consequences of his monetary policy. There should be a truly democratic debate about his powers and an immediate introduction of accountability of his actions to the taxpayers.”