27th January 2013
The Observer reports that Carney, speaking at the World Economic Forum in Davos, was talking in general terms rather than specifically about the British economy. But clearly the UK is one country that could do with such a boost.
Carney also said: “There remains considerable flexibility – which includes the use of communications and the use of unconventional measures”.
Examining Carney’s words about the future and indeed his past deeds has become something of a sport among economists and economics pundits.
There are already some suggestions that a policy shift could see the Bank outlining just how long it will keep interest rates low for on the basis that this gives business and investors much more certainty and therefore has a bigger impact on their behaviour. Other even more unconventional measures might include offering loans directly to business.
At Mindful Money we are curious not just about how any unconventional measures might manifest themselves but also whether the Bank of England under Carney risks straying on to the Treasury’s turf when it comes to economic policy.
Treasury policies are currently under fire and many economists fear the UK risks slipping back into its third recession since the financial crisis.
What is difficult to see emerging policy wise – whether it emanates from Westminster or the Bank’s headquarters in Threadneedle Street – is any respite for savers. While they have arguably benefitted from quantitative easing’s impact on ‘asset prices’, they have also been caught between relatively high inflation and historically-unprecedented, low, long-term interest rates. The Bank has also consistently missed its inflation target of two per cent.
Campaigners have suggested that it is savers and particularly older savers who have shouldered a lot of the economic pain. It would be good to see measures to help them. Unfortunately we don’t expect much of this in Mark Carney’s plans, whether they are gravity defying or not.