London, England, United Kingdom (4E) – Bank of England (BoE) Deputy Governor Charlie Bean said interest rates will not rise anytime soon as he admits he is surprised with the investor response to that statement.
In an Aug. 23 interview in Jackson Hole, Wyoming, Mr. Bean said the UK central bank is not just communicating to market participants, but also to households and businesses, to offer them a clear message that there will be no imminent rise in interest rates.
Earlier this month, new BOE governor Mark Carney said the bank would not consider increasing interest rates before unemployment falls 7.0 percent, below the second quarter’s reading of 7.8 percent, as long as it does not impact financial stability and price levels.
Mr. Bean said he was surprised by the financial markets’ reaction to the so-called forward guidance policy of the central bank, though he said officials were not in the business of manipulating market expectations.
Despite the recent rise in short-term gilt yields, the effect of any policy tightening should be eased by the unemployment threshold, which serves as guidance on how much growth is needed to regain lost ground, according to Mr. Bean.
The UK economy has expanded in the second quarter by growing 0.7 percent. Mr. Bean said policy makers may need to employ further quantitative easing if the economy suffers a significant downturn.