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Is Mark Carney really the 'unreliable boyfriend' of monetary policy?

Mark Carney answering questions earlier. Photo: PA/PA Wire/Press Association Images

The Governor of the Bank of England is an "unreliable boyfriend," blowing hot and cold on whether interest rates are about to rise.

This comment from an MP this morning raised a few laughs as Mark Carney gave evidence to the influential Treasury Select Committee but it does rather reflect the difficulty he has had in giving "forward guidance."

From the moment Mr Carney arrived at the Bank last summer he has been at pains to assure households, businesses and investors that the Bank would only start putting interest rates up in the (relatively) distant future.

He first tried to use unemployment as an easy-to-understand indicator for the health of the economy but he had to abandon that in the spring as almost miraculous numbers of people found jobs - but doubts remained about the recovery.

Then he adopted a much broader and vaguer set of data to try to continue that guidance as recently as last month. Rates were still on hold, he said but investors reckoned the first rise was coming in April next year.

Then, two weeks ago, a sudden turnaround: speaking before an audience of City grandees he announced the first rate rise "could happen sooner than markets currently expect."

That really set the cat amongst the pigeons. Sterling rocketed against other currencies as "markets" hurriedly changed their forecasts. Interest rates were going up this year, perhaps as soon as November.

Members of the Treasury Select Committee grill Mr Carney. Credit: PA/PA Wire/Press Association Images

And today? The governor seemed to have two conflicting messages as he was grilled by the MPs. First, "as the economy normalises the time to raise rates is coming closer," he said, repeating the new mantra.

But that was tempered again and again throughout the two hour hearing by his focus on the fact that wages have fallen in real terms (taking into account inflation) for all but six months of the last six years.

In other words, if people still don't have extra cash in their pockets there's little risk that they'll spend lots, pushing up inflation (his number one concern).

Sterling took a knock as he spoke, falling 0.3 per cent against the dollar. His words seem to imply rates aren't about to rise imminently after all.

Confused? You're not alone. But take heart: Mr Carney thinks we're all missing the point.

"What matters is not the timing but the path of interest rates ... which [we have] indicated will be gradual and limited."

Or to put it another way, it should be no surprise that the era of record low interest rates is coming to an end but when the rates do rise it will be in little steps.

Not so much an unreliable boyfriend as a rather complicated one, perhaps.