Bank of England forward guidance decision was not unanimous
One member of the Bank of England's nine-strong Monetary Policy Committee (MPC) voted against the Bank's forward guidance policy due to a disagreement regarding the time frame for one of the "knockout" conditions that would remove the link between rates and unemployment (minutes).
The Bank said that Martin Weale supported in principle the use of forward guidance in monetary policy, but disagreed with the time horizon of one of the "knockout" clauses that would sever the link of an interest rate hike to unemployment.
The point in contention was the clause that, if the committee thinks inflation will be 0.5 percentage points or more higher than its two per cent target in 18 to 24 months' time, the MPC would not necessarily raise rates, even if unemployment falls below seven per cent. Weale thought that this time period was too long.
As expected, the MPC voted unanimously in favour of holding interest rates and quantitative easing, and that there would be no assumption of a change in policy even if the unemployment threshold were reached.
But there were other conflicts in the minutes with some members disagreeing with Carney's press statement that the rise in market interest rates was unwarranted.
At the same time, the Office for National Statistics released data showing that the number of people claiming jobseeker's allowance – a key indicator of future unemployment levels – dropped off more than expected.
The minutes and unemployment data together caused the pound to jump 0.35 per cent to $1.55 before shortly erased some of these gains. The FTSE fell 0.44 per cent to 6,583 before returning to growth.
From yesterday: