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| Mark Carney says forward guidance should boost economy | |
| (35 minutes later) | |
| New Bank of England Governor Mark Carney has said that his new regime should boost the UK's economic growth. | |
| He told the BBC that keeping interest rates at the current level until unemployment fell below 7% was expected to boost the economy by "more than half a percentage point of GDP". | He told the BBC that keeping interest rates at the current level until unemployment fell below 7% was expected to boost the economy by "more than half a percentage point of GDP". |
| But he warned that this prediction should be taken "with a grain of salt". | But he warned that this prediction should be taken "with a grain of salt". |
| He also told the Today programme it was "striking" that there were no women on the Monetary Policy Committee (MPC). | He also told the Today programme it was "striking" that there were no women on the Monetary Policy Committee (MPC). |
| The MPC is the committee at the Bank of England responsible for setting interest rates. | The MPC is the committee at the Bank of England responsible for setting interest rates. |
| Mr Carney said that while he was not responsible for appointing members of the MPC, it was important to "grow top female economists all the way through the ranks", so there would be more female candidates for MPC positions and qualified candidates to be a future governor. | Mr Carney said that while he was not responsible for appointing members of the MPC, it was important to "grow top female economists all the way through the ranks", so there would be more female candidates for MPC positions and qualified candidates to be a future governor. |
| 'Considerable number' | |
| On Wednesday, Mr Carney gave his first news conference since taking over at the Bank of England, setting out his new regime of forward guidance. | On Wednesday, Mr Carney gave his first news conference since taking over at the Bank of England, setting out his new regime of forward guidance. |
| Under this system, the MPC will not consider raising interest rates until the unemployment rate falls below 7%, which he predicted would take about three years and the creation of 750,000 jobs. | Under this system, the MPC will not consider raising interest rates until the unemployment rate falls below 7%, which he predicted would take about three years and the creation of 750,000 jobs. |
| There are get-out clauses in this policy if there are threats to financial stability or a danger of inflation getting out of control. | |
| Mr Carney said that Bank of England economic models had assessed the differences between what would happen with current market interest rates without the forward guidance and "what would happen if interest rates stayed at the same level until effectively that [7%] unemployment threshold was reached about three years from now". | |
| "It's more than half a percentage point of GDP... which is a considerable number," he said. | |
| He added that "as with any economic prediction you have to have some humility so take all of this with a grain of salt". | |
| The US Federal Reserve and the European Central Bank have already provided forward guidance on their interest rate policies. |