Former BoE economist: 'Forward guidance was a fantasy'

Mark Carney hasn’t quite abandoned forward guidance although, as I reported earlier today, the governor of the Bank of England said in Davos it’s going to have to “evolve” now the main threshold on unemployment linked to interest rates is about to be breached two years earlier than he thought.

The debate about whether guidance is a good idea rumbles on.

I spoke to an economist who, until recently, sat on the Bank's committee which makes interest rate decisions and he thinks the whole policy is pointless and a “cheap diversion."

“Forward guidance never lived except as a fantasy,” Adam Posen told me.

“It was just empty talk.”

Dr Posen thinks that the attempt at focussing on one indicator was misguided and the Bank will have to look at many variables in future and explain these clearly.

“Distilling it down any more than that cheats the public,” he said.

That is indeed what the governor seems to be planning. The current committee of policymakers will consider how to communicate their intentions better next month

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