News Column

BCC: MPC Must Strengthen Its Forward Guidance Policy

February 6, 2014

LONDON, Feb. 6 -- The British Chambers of Commerce issued the following news release:

Commenting on the interest rate decision announced today by the Bank of England'sMonetary Policy Committee, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:

"Given the global uncertainties, and the still delicate state of the UK economy, the decision to hold both interest rates and QE was uncontroversial and appropriate. As British business has enjoyed the added stability and confidence that has come with the forward guidance policy, the speculation favouring an early interest rate rise is unhelpful and potentially damaging for the economy.

"While the essence of the forward guidance strategy is to reassure businesses that interest rates will be kept as low as economic conditions will allow, the MPC should use next week's Inflation Report to place its policy on firmer foundations. Linking forward guidance exclusively to unemployment has proved counter-productive. Focusing instead on a range of key indicators would increase its effectiveness, reinforce business confidence, and pour cold water on the cynicism that many city analysts have demonstrated."

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Source: Targeted News Service

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