The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Bank of England Governor Mark Carney is coming under pressure to tighten monetary policy as Britain nears – or even breaches – the 7-per-cent jobless threshold he has said would serve as point to consider rate hikes.
Bank of England Governor Mark Carney is coming under pressure to tighten monetary policy as Britain nears – or even breaches – the 7-per-cent jobless threshold he has said would serve as point to consider rate hikes.
(CHAD HIPOLITO/THE CANADIAN PRESS)

Put up or shut up, Carney critics demand as U.K. recovery accelerates

One of the signal achievements that burnished Mark Carney’s halo during his tenure at the the Bank of Canada was the introduction of forward guidance – a conditional pledge, issued at the height of the global recession, to keep interest rates steady for some time, under certain economic conditions.

So it was no surprise that Mr. Carney would take this no-cost confidence-booster to Britain when he took the helm of the Bank of England last summer. Scarcely a month into his new job, Mr. Carney took a page out of the U.S. Federal Reserve’s playbook and tied future monetary policy directly to the jobless rate – in what we’ll call his 7 per cent solution. As long as inflation remained tame, interest rates would not budge from an historic low of 0.5 per cent until unemployment fell to 7 per cent. That happy event, the central bank had concluded, might not happen before mid-2016.