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We’ve sent a ‘clear signal’ on interest rates – says Bank deputy

Your Money
Written By:
Your Money
Posted:
Updated:
27/08/2013

The deputy governor of the Bank of England, has said the Bank has sent a “clear signal” it won’t increase interest rates anytime soon as he expressed surprise at investors’ reaction to its position.

The central bank is “communicating not just to market participants, but to people, to households and businesses, to give them a clear signal that interest rates are not likely to rise imminently,” Charlie Bean, the deputy governor of the Bank of England, said in an interview with Bloomberg.

Under its policy of ‘forward guidance’, the Bank last month forecasted leaving its key rate at a record low 0.5% until late 2016 – when it expects the unemployment rate to drop to 7%.

But investors appear to doubt whether the Bank’s Monetary Policy Committee will leave it that long before making a change: yields on short-sterling futures contracts expiring in September 2015 have risen this month and are at the highest in almost nine weeks.

While Bean said he was “a little bit” surprised by the reaction of financial markets to the bank’s use of forward guidance, he said officials were not “in the game of trying to manipulate market expectations”.

“What we’re trying to do is explain as clearly as we can, what are the factors that will guide policy going forward, recognizing the world is an uncertain place,” he said.

“The question of whether what’s in the market is warranted or not depends very much on your view of how much scope there is for expansion before inflationary pressures start manifesting themselves.”