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Third Vote Said Held by BOE in Carney Guidance Debate

BOE Governor Mark Carney
Mark Carney, governor of the Bank of England, pauses during the bank's quarterly inflation report news conference at the Bank of England in London, on Aug. 7, 2013. Photographer: Simon Dawson/Bloomberg

Bank of England policy makers held three votes for the first time at their meeting this month as they debated introducing guidance on interest rates under new Governor Mark Carney, according to a central bank official.

The Aug. 1 vote on adopting the plan linking the key rate to unemployment was a one-off and won’t be repeated at every Monetary Policy Committee meeting, said the official, who asked not to be named in line with the bank’s policy. Minutes showing how the nine-member panel voted on interest rates, quantitative easing and the new policy will be published on Aug. 14, the same time as jobless data for July.

The record will be closely watched as investors and economists look for insight into policy makers’ commitment to guidance after Carney said Aug. 7 the bank probably won’t raise its benchmark from a record low 0.5 percent until unemployment falls to 7 percent. The plan includes a number of caveats, including two linked to inflation, which has previously divided the committee in its voting.

“Several members of the MPC, including Deputy Governor Charlie Bean, have in the past expressed doubts about the use of guidance as a policy tool,” said Victoria Clarke, an economist at Investec Securities in London. “So we do not expect the debate about whether to issue forward guidance to have been a simple one.”

At the July meeting, Carney’s first as governor, the MPC kept policy unchanged after the first unanimous vote in nine months.

Dissenting Vote

Richard Barwell, an economist at Royal Bank of Scotland Group Plc, said a unanimous vote is not certain this month, adding that a disagreement “would likely shake confidence in the guidance.” Brian Hilliard, an economist at Societe Generale SA in London, agreed there could have been a split.

“Don’t rule out entirely the possibility of a dissenting voter,” Hilliard said. “It is not impossible that one of the more hawkish members voted against the proposition to introduce forward guidance.”

The BOE’s forecasts show unemployment staying above 7 percent at least until the third quarter of 2016. Investors have already shown skepticism that the BOE will keep the key rate unchanged for that long.

The pound was little changed against the dollar today and is set for a weekly gain after rising to the highest in seven weeks yesterday. It was trading at $1.5536 as of 11:28 a.m. in London. The 10-year gilt yield fell two basis points to 2.46 percent after reaching 2.56 percent on Aug. 7, the highest since June 25.

Economists reduced estimates for the jobless rate through 2015 this month, with Bloomberg’s monthly economic survey published showing the median projection for the average level that year at 7.6 percent compared with 7.8 percent seen in July. The survey of 21 economists conducted from Aug. 2 to Aug. 8 showed the median for the average rate in 2014 was seen at 7.7 percent compared with 7.8 percent in last month’s poll.

Download: Blanchflower Sees Long BOE Accommodative


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