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| Davos 2014: Osborne says criticism of Bank of England unfair | Davos 2014: Osborne says criticism of Bank of England unfair |
| (about 2 hours later) | |
| Criticism of the Bank of England's forward guidance policy has been unfair, Chancellor George Osborne has said. | Criticism of the Bank of England's forward guidance policy has been unfair, Chancellor George Osborne has said. |
| "I completely reject that forward guidance is a failure," he told a panel on monetary policy in Davos. | "I completely reject that forward guidance is a failure," he told a panel on monetary policy in Davos. |
| He added that the Bank's clear communication had helped create "a very strong set of data in the UK". | He added that the Bank's clear communication had helped create "a very strong set of data in the UK". |
| Figures on Wednesday showed the unemployment rate had fallen much faster than the Bank expected. | Figures on Wednesday showed the unemployment rate had fallen much faster than the Bank expected. |
| Last year, Bank of England governor Mark Carney said that the Bank would not consider raising interest rates until the jobless rate had fallen to 7%. | Last year, Bank of England governor Mark Carney said that the Bank would not consider raising interest rates until the jobless rate had fallen to 7%. |
| Chancellor Osborne stressed that the unemployment rate was still only at 7.1%, and quoted Mr Carney's comment from a BBC Newsnight interview on Thursday that there was no need for an immediate rise in interest rates. | Chancellor Osborne stressed that the unemployment rate was still only at 7.1%, and quoted Mr Carney's comment from a BBC Newsnight interview on Thursday that there was no need for an immediate rise in interest rates. |
| The Bank of England had not been expecting the jobless rate to hit 7% for another two years. | The Bank of England had not been expecting the jobless rate to hit 7% for another two years. |
| In a separate speech, made in Davos on Friday, Mr Carney said that the UK's unemployment rate had fallen "faster" than the Bank had anticipated when it first set 7% as a trigger for a possible review of interest rates. | |
| Falling faster | |
| However, he said that this would not lead to a hurried rate rise, and re-affirmed that the 7% unemployment marker "is merely the point at which the MPC begins to even think about adjusting policy". | |
| He added that any review of forward guidance would come in February's Bank of England inflation report, and that "The MPC will consider a range of options to update our guidance". He did not suggest that forward guidance was to be abandoned. | |
| But Mr Osborne said in his speech that the debate over forward guidance was only taking place because there was a recovery underway, highlighting the differences with the "gloomy debate" about the economy at Davos last year. | |
| He added that the growth in the economy was evidence that monetary policy had worked and that he had expanded the range of tools available to the Bank of England. | He added that the growth in the economy was evidence that monetary policy had worked and that he had expanded the range of tools available to the Bank of England. |
| On the sidelines after the discussion, a delegate describing himself as a market participant leapt to the defence of Mr Osborne and Mr Carney, saying it was perfectly clear that the 7% had been a threshold and not a trigger for the raising of interest rates. | On the sidelines after the discussion, a delegate describing himself as a market participant leapt to the defence of Mr Osborne and Mr Carney, saying it was perfectly clear that the 7% had been a threshold and not a trigger for the raising of interest rates. |
| Mr Carney, in his Friday speech, said that the UK's economic recovery "has some way to run before it would be appropriate to consider moving away from the emergency settling of monetary policy". | |
| "It is widely recognised that our 7% threshold is not a trigger for raising the bank rate. Last August, the MPC said that when the 7% unemployment threshold was reached, there should be no assumption of an immediate, automatic change to its policy stance," he said. | |