Carney to issue clarity on forward guidance

Central bankers must face the music this week and provide more clarity on forward guidance with respect to current monetary policies.

Now that we’ve heard from the Federal Reserve’s Janet Yellen, the stage belongs to the governor of the Bank of England.

Mark Carney previously stated that unemployment would need to drop to 7% before a change in the interest rate was even considered; although this is something that wasn’t anticipated until 2016, UK joblessness is now heading towards that level, and Mr Carney has conceded that he will need to update his former guidance. While the unemployment rate was never to be construed as a formal trigger for hiking interest rates, we may now see Mr Carney moving the goalposts and reduce the threshold figure to 6.5%.

The British economy expanded by 1.9% in 2013 – the fastest GDP growth since the first quarter of 2008 – after a 0.7% growth in final three months of last year. Growth is still below the 2008 peak however, something that will likely be alluded to by the governor in what is expected to be a dovish statement.

The reduction in price pressure coupled with low wage growth has helped to push back market expectations of any monetary policy tightening. Bearing in mind that the key mandate of the Bank of England is inflation and price stability, we may well see a return to more emphasis on this specific area.

This week, the Confederation of British Industry raised its 2014 growth forecast to 2.6% from a November prediction of 2.4%. It lowered its inflation forecast to 1.9% from 2.5% and predicted no interest-rate increase until the third quarter of next year.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.