Wunderkind or one hit wonder, Governor Carney at the Bank of England insisted this week that the "Old Lady" will be looking at a wide range of signals on the labor market when deciding whether to tighten policy. Carney has a tough job. Strong UK data calls into question his forward rate guidance methodology. Carney is now leading the charge on how to interpret UK metrics and how the readings can be best applied to make a change to monetary policy as the governor continues to practice his policy of transparency.
A fall in the UK's jobless rate last summer had the market speculating that the BoE would be "forced" to raise the o/n benchmark sooner than the market had been expecting.
Under the UK forward guidance mandate, policy makers have tied future benchmark interest rates (discussions) with the unemployment rate. Carney insists that a fall in the unemployment rate to +7% from +7.7% in the three-months through August would be a signal for the BoE to assess its monetary policy stance - not "automatically changing it."
BoE October minutes released this week show that policy makers believe that the unemployment rate will likely fall faster in H2 than originally anticipated during the summer. Under Carey's influence, new changes within the BoE require better explanation and forward guidance, along with the sweeping changes in the liquidity rules, new such procedures that require that.