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Bank Of England Folds On "Forward Guidance"

Tyler Durden's picture




 

Just a week ago, Ben Bernanke stumbled when he almost admitted that "forward guidance worked in theory, but not in practice," and while the Fed is sticking to its guns with lower for longer "forward guidance" to replace "as much money as you can eat" quantitative easing; and the ECB promising moar for longer; the Bank of England's Mark Carney just threw them all under the bus by u-turning on his employment-based forward guidance strategy. Having previously established thresholds for his monetray policy guidance, as the FT reports, he has now ditched those plans (as we warned he might "lose his credibility" here) as the British economy is "in a different place" now. And still, we are supposed to trust these bankers to run the world? Perhaps most interesting is the FT changed its title on the story very quickly!

 

Via The FT,

...

 

Mr Carney signalled the policy U-turn in a series of TV interviews while attending the World Economic Forum in Davos. However, he added that he had no plans to raise interest rates “immediately”.

 

...

 

Speaking to the BBC’s Newsnight in response to the news this week that UK unemployment had fallen to 7.1 per cent, almost to the point the BoE said it would consider a rate rise, the bank has decided not to revise its 7 per cent unemployment threshold but drop the idea completely.

 

...

 

The BoE followed the Federal Reserve in announcing forward guidance last August in a bid to make monetary policy “more effective”. It said it would not consider a rate rise in the UK at least until unemployment fell to 7 per cent from the rate last summer of 7.9 per cent.

 

The BoE forecast that it was most likely that unemployment would fall to the 7 per cent threshold only in 2016. Recognising a serious forecasting error has caused red faces at the BoE and created confusion over the policy, Mr Carney will address the subject again on Friday and Saturday.

 

...

 

Commenting on the huge errors in the bank’s forecasts, Mr Carney said: “If our forecast is going to be wrong, it’s better to be wrong in that direction”.

 

What is perhaps more interesting is the fact that the FT changed the title of the story very quickly...

 

Before...

 

After...

 

It seems someone at the BoE did not like it...

 

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Thu, 01/23/2014 - 16:02 | 4359988 HedgeAccordingly
HedgeAccordingly's picture

SO has O=bumma - http://hedge.ly/1egRZdY 

Thu, 01/23/2014 - 16:17 | 4360035 James_Cole
James_Cole's picture

Commenting on the huge errors in the bank’s forecasts, Mr Carney said: “If our forecast is going to be wrong, it’s better to be wrong in that direction”.

The "oh, fuck it" policy - always instills a great deal of confidence. 

Thu, 01/23/2014 - 16:23 | 4360052 Pinto Currency
Pinto Currency's picture

 

After barely achieving lift off, Carney never did get to escape velocity to put the economy in orbit.

Now he's about to experience a painful reentry.

He's still sore from the last time.

Thu, 01/23/2014 - 16:28 | 4360064 synergize
synergize's picture

We cant have people think Central Bankers have no idea what they're doing and are "ditching" policies...

 

Thu, 01/23/2014 - 17:06 | 4360206 Herd Redirectio...
Herd Redirection Committee's picture

The previous currency he was in charge of, the CAD, just dumped 10% in the last month.

Thu, 01/23/2014 - 21:33 | 4361048 Scarlett
Scarlett's picture

I hope their bond crisis starts as soon as possible.

Thu, 01/23/2014 - 16:06 | 4359998 john39
john39's picture

"signals scrapping" sounds so much more sophisticated and professional than "scaps".....  or something.

Thu, 01/23/2014 - 16:12 | 4360000 nope-1004
nope-1004's picture

People falling off of the extended benefits payroll, thereby no longer counted as "unemployed", are causing a problem for the printing machines.  How now to print with unemployment going down?  CB's are a victim of their own flawed statistics.

Carney looks like Ben now - a friggin tool and a liar.  Not that he wasn't before, just sayin'....

 

Thu, 01/23/2014 - 16:28 | 4360063 reload
reload's picture

I think it odd that the BOE completely underestimated the ability of the UK economy to add jobs.

The truth is though that most of these jobs are low pay / minimum wage dead ends. A significant number of them are zero hour contracts and the lucky new hires may average 10 or 12 hours per week of actually earning anything. Welfare payments or 'working family tax credit'  will make up the balance to a low paid full time job. But hey, it makes the numbers look good.

If the BOE had set a forward guidance target based on some more solid / genuine numbers they would not be such a joke.

Average hours worked. & average hourly earnings would paint a better picture of what is really going on. 

It ain't pretty.

Thu, 01/23/2014 - 16:43 | 4360123 Occident Mortal
Occident Mortal's picture

Average pay increased 0.9% year on year.

Therefore the new jobs were a pretty close fit to the existing pay distribution and not all low pay and zero hour contracts as you describe.

Yes it's a surprise just how the UK has picked up, but let's recognise good news for what it is when it is there.

The data was bullish and when you dig deeper through it. It is bullish. To deny this just hurts your credibility.

Thu, 01/23/2014 - 16:37 | 4360104 Occident Mortal
Occident Mortal's picture

The number of economically inactive people in the UK has fallen by 22,000 quarter on quarter so that argument is false.

The UK has actually rebounded in a rather broad and robust manner with water and sewerage, construction, hotels and restaurants, agriculture and forrestry and fishing being the fastest growing sectors.

Yes I am surprised by this, by hey let's appreciate good news when good news is there to appreciate.

George Osborne has shrunk the public sector (even in the face of bitter opposition) and the private sector has really accelerated.

At this rate the government will soon be in a budgetary surplus.

This is actually rather shocking. Everyone opposed Osbornes swinging axe, even the BOE and the IMF. But nobody can deny the results. He was right. Other similar stories of cutting the public sector include Iceland and Ireland. It's the Keynesian governments who are still struggling.

And I urge you guys in the US to shrink your government too. Stop giving airtime to politicians and look to your corporations for leadership, it's your businesses that feed and clothe you, not your congressman.

Thu, 01/23/2014 - 17:00 | 4360182 johnnyarrowmaker
johnnyarrowmaker's picture

So, reading between the lines, if you're a tory, living in London or the SE, male and probably in your 40s or 50s and read the msm then you might have something.

Otherwise, the 95% of people see it differently.

Five million people on zero hours contracts. They can't even afford to shop where they work ( Tesco for example).

Banks still ripping people off.

Service culture dead and buried.

Austerity forever.

Interest rates almost zero.

If everything is fixed why the need to continue or even increase pressure on workers and savers?

Oh I forget, it's the emperor's new clothes show again.

Thu, 01/23/2014 - 17:06 | 4360203 reload
reload's picture

You make some interesting points & no down arrow from me.

Osbourne has barely scratched the surface of what needs doing to public spending IMO. particularly welfare payments.

Let's think about what average hourly earnings are today when compared to 2008 and inflation adjusted. 

Thu, 01/23/2014 - 18:44 | 4360268 Australian Economist
Australian Economist's picture

According to Austrian Theory if you want to get out of a recession you should do the following:

 

  • Reduce taxes
  • Reduce government spending
  • Let wages fall
  • Let prices fall
  • Reduce unemployment benefits
  • Expediate liquidation
  • Encourage saving

 

I'd give Osboune a 6/10, he could have done a lot worse but there is still a lot of work to do. I am especially disappointed with how he has handled the housing market.

Thu, 01/23/2014 - 16:07 | 4360002 ejmoosa
ejmoosa's picture

The problem with foward guidance from these asshats is that there is only one description that they can use-"Things are going to improve".

 

And we know that ain't the truth.

Thu, 01/23/2014 - 16:45 | 4360132 Occident Mortal
Occident Mortal's picture

For once, things did improve.

Thu, 01/23/2014 - 16:09 | 4360004 Grande Tetons
Grande Tetons's picture

Carney shitcans forward guidance. 

Thu, 01/23/2014 - 16:09 | 4360008 buzzsaw99
buzzsaw99's picture

bang the close and all will be well

Thu, 01/23/2014 - 16:12 | 4360009 Cognitive Dissonance
Cognitive Dissonance's picture

Abandon ship. Everyone fend for themselves.

<I love the smell of central banker blood in the morning.>

BTW the FT is a (central) banking whore who knows full well who they are servicing.

Thu, 01/23/2014 - 17:09 | 4360209 Herd Redirectio...
Herd Redirection Committee's picture

Only read FT if you can read between the lines.  Kinda lika reading 'Foreign Affairs'.

Thu, 01/23/2014 - 20:08 | 4360784 BigJim
BigJim's picture

Pearson Group. FT, Economist... both partly owned by Rothschildren.

Thu, 01/23/2014 - 16:11 | 4360010 Yen Cross
Yen Cross's picture

    I'm sure that instills a lot of faith in BoE monetary policy with the Serfs. /s

Thu, 01/23/2014 - 16:36 | 4360060 Tall Tom
Tall Tom's picture

It is all about maintaining the appearance. It is no different than any other type of politicking or LYING.

 

I like it when they reveal the truth later on., like Mitt Romney admitting that they had to STEAL THE REPUBLICAN NOMINATION...

 

http://www.thedailysheeple.com/mitt-romney-finally-admits-what-we-all-knew-they-had-to-steal-the-republican-nomination-from-ron-paul_012014

 

http://washingtonexaminer.com/in-new-film-a-dramatic-look-at-mitt-romneys-loss-of-confidence/article/2542430

Thu, 01/23/2014 - 16:17 | 4360029 Al Capowned
Al Capowned's picture

This was so predictable, BOE won't raise rates if employment goes to zero.

Public, financial, private debt to GDP 900% in UK.

Government owned UK gilts and index linked gilts 1.386 trillion , annual interest 50 billion and climbing .

Every gullible 25-35 year old buying £300,000 2 bed semi detached house's with 5% deposit, floating rate mortage!

This country is going to blow big!!!

Thu, 01/23/2014 - 16:18 | 4360036 Quinvarius
Quinvarius's picture

Proving no one anywhere is doing it for employment purposes, and that everyone knows all employment numbers are rigged anyway.  It is all about impossibly huge debt that needs to be monetized at low rates--Failing banks and failing governments.

Thu, 01/23/2014 - 16:21 | 4360046 Al Capowned
Al Capowned's picture

But he looks like George Clooney who cares if all his guidance is wrong or just lies.

Stop disturbing dancing on Ice for me...

Thu, 01/23/2014 - 16:21 | 4360050 DIgnified
DIgnified's picture

Is anyone else done listening to these asshats?  I think its high time we stopped listening to people just because they have a large swath of retarded mouth-breathers who like them. 

Thu, 01/23/2014 - 16:25 | 4360057 Inthemix96
Inthemix96's picture

Make no bones about it, the United Kingdom is fucked.  Trust me I live here.

5% deposit by the proles, who are braindead asking the fuckers that have been bailed out and still robbing the sheep blind, on top of in-bred peodophiles who are running the show, while the 'Law' or 'Police' asking the home office if they can use use water cannons on protesters who havent protested yet?

Aye, stick a fork in this swine, its fucked, and getting fuckered.

Thu, 01/23/2014 - 16:51 | 4360155 buzzsaw99
buzzsaw99's picture

agreud. the proper phrase is  "moar fuckederd" imo

Thu, 01/23/2014 - 17:10 | 4360213 Herd Redirectio...
Herd Redirection Committee's picture

The UK, City of London specifically, reminds me of someone who gets Stockholm Syndrome, and then actively begins helping the kidnapper w/ more kidnapping.

Thu, 01/23/2014 - 16:30 | 4360073 zenon
zenon's picture

Si if instead of lowering the unemployment threshold to 6.5% and looking like a complete prick, he scarped forward guidance alltogether so as to look like a plain "prick." So could somebody please tell me how that is bullish for sterling?

Thu, 01/23/2014 - 16:32 | 4360079 giggler321
giggler321's picture

Hey people cut him some slack, he's only been in the job a few months and he's got something publically wrong.  Give him more time to make some bigger mistakes - I mean he didn't exactly do wonders to the Candian econmy so with the same set of inputs, doing the same thing over again, how can we expect a different result? (Einstein)

 

Go Carney, go!

Thu, 01/23/2014 - 16:54 | 4360161 Seasmoke
Seasmoke's picture

Pretty soon we all will not have to come to ZH each day.... the collapse is just about here.... no need to call out or listen to the lies any more. 

Thu, 01/23/2014 - 16:55 | 4360165 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

The level of personal debt and mortgage debt in the UK is just breathtaking,it is only sustainable with zero interest rates,the minute rates go up it's all over.Carney and the government know it.

The Bank of Englands credibility is completely shot,the minute they issue guidance that involves raising rates or ending QE baesd on some future target of unemployment or other metric being met, everyone knows the goal posts will not just be moved, but taken away and burned.

How sterling has survived such duplicitous briefings is beyond me,since everyone and his wife knows QE and ZIRP are the only tools left. Anyone holding sterling or sterling denominated assets deserve all they get in my opinion.

When the fx markets finally wake up to reality in the UK it will be vicious.

Thu, 01/23/2014 - 17:21 | 4360249 Son of Loki
Son of Loki's picture

"Cold, damp and poor," is how my friend from the UK describes his nation. He said Dickens would once again have tons of raw material nowadays.

Thu, 01/23/2014 - 17:38 | 4360295 falak pema
falak pema's picture

the UK has never been moar bouyant as far as the Boris Brigade of Oligarchs is concerned. UK economy booming and now UK produces more cars than France according to a 2013 assessment. Ford and BMWand Tata beat Renault and Peugeot.

So depends which side of the klass divide you stand. 

OT/ Here is a slap on Obammy's wrist concerning NSA : will it produce results...?

US government privacy board says NSA bulk collection of phone data is illegal | World news | theguardian.com

Thu, 01/23/2014 - 22:32 | 4361242 TheReplacement
TheReplacement's picture

Hopefully they talk about this in the news on tv and papers (online) in the US.  Such a thing should swing any fence sitters.  It'll certainly make our arguments that much weightier now that even HIS own branch of the government is dissenting.

Isn't it revolting how there could be fence sitter in these times?

Thu, 01/23/2014 - 17:46 | 4360318 Jack Burton
Jack Burton's picture

I for one am pretty surprised by the robust economic growth figures coming out of Britain. I know they are shady to some degree, but even so, they seem to show an economy in growth. That just seems odd, given most of Europe is in recession and Britain is deeply in debt, both public and private. Inflation especially is biting into the consumer like a starving wolf. Since all services have long been privatized, price jumps in utilites are nearly out of control. Petrol, natural gas, food, house prices, insurance and other basics. Granted clothes and electronic devices flowing from China are still pretty cheap.

Autos seem to be a bright spot. Banking, being a big part of GDP is prospering from the large BoE Quantitative Easing, yet RBS and others are still, technically insolvent. Yet the sector brings billions in profits into the upper 1% of top income earners. The UK is about to embark on nation wide fracking, and this is expected to be a mini boom in jobs. Whenever you can produce oil and gas on your own home soil, all the money stays in your local economy, all the jobs go to local earners, and no foreign exchange needs to be earned to fuel Britain.

Fundamentally Britain is a broken and bankrupt nation, but with their position of Banker to 1/2 the world, and able to print and buy it's own guilts, they may have a lot longer lease on economic life that I though possible earlier this year. I especially am following the gas and oil fracking boom, when it is going full out in a year or so, the economic boost should be showing up in UK economic stats.

I still believe, like Max Keiser, that Britain is going to implode, that may take more time than Max thought.

Thu, 01/23/2014 - 19:24 | 4360651 The Abstraction...
The Abstraction of Justice's picture

5% growth is nothing to brag about when you have 15% inflation.

Thu, 01/23/2014 - 22:41 | 4361287 TheReplacement
TheReplacement's picture

Did not China make a trade deal with the UK?  Are not Chinese investing heavily in China (the US too).  Are the well off leaving France for places like the UK?  There are lot of factors at play.  It's almost like watching a wave going back and forth in a wave pool and hitting the different sides.  It's just hitting the UK now.  Shall we expect inflation to play on this success?  Will the British own any of the UK when it's over?

 

Thu, 01/23/2014 - 18:29 | 4360464 Atomizer
Atomizer's picture

International claims (A + B)

Foreign claims (A + B + C)

Bank of International Settlements. Lots of BOE activity today. Enjoy!

Thu, 01/23/2014 - 23:39 | 4361515 Clowns on Acid
Clowns on Acid's picture

It's a game of musical feckin' chairs. Carney from the Bank of Canada to the Bank of England. Stanley "dual citizen" Fisher from Bank of Isreal to the Vice Chair of the US Fed.

Waek Euro and JPY to strong Euro and GBP, but weak USD and CAD. A race to zero with "growth" bullshit being spouted from CB's all the time.  These peope deserve serious jail time after "The Reckoning", and a reckoning is definitely coming.

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