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MPC split as Weale rejects Carney's forward guidance
by Dylan Lobo on Aug 14, 2013 at 10:12
The minutes from this month's Monetary Policy Committee (MPC) meeting reveal Martin Weale voted against the proposition of forward guidance.
Weale (pictured) argued that while he was supportive of the notion of forward guidance, he registered his preference for a shorter time horizon for the first inflation knockout that was agreed at 18-24 months, meaning inflation will be 0.5% or higher above the 2% target over this period.
Weale said he intends form his future judgements on the application of guidance and the knockout criteria in line with the framework adopted by the committee.
Meanwhile the MPC was unanimous in voting against more quantitative easing and keeping interest rates at a historic low of 0.5%.
In his guidance last week, Carney said that interest rates would remain at historic lows until the unemployment threshold fell to 7%. A separate report released today's this remains some way off, with the unemployment rate sticking at 7.8% in June.,
Capital Economics analyst Vicky Redwood is not too concerned by Weale's vote.
'The fact that the minutes of this month’s MPC meeting show that one member voted against the decision to implement forward guidance will hardly help to reassure the markets about how firm the MPC’s commitment is,' Redwood said.
However, she warned the MPC may need to do more to stave off a further rise in gilt yields, which sit at a two-year high.
'With gilt yields rising further after this release the MPC may have to take further action to head off what it has termed the 'unwarranted' rise in market rate expectations.'
The pound was up 0.21% to 1.547 against the dollar on the back of the reports.
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