James Moore: We'd better not rush headlong into a party as Carney goes for growth
Outlook Mark Carney seems determined to make a noise, and despite an economic backdrop which appears to give him and his colleagues on the Bank of England's Monetary Policy Committee only limited room for manoeuvre, he's surely done it.
His announcement that the historically low interest rates won't move until UK unemployment is down to 7 per cent, and that could take three years or more, was hailed by organisations ranging from the British Chambers of Commerce to the TUC.
They'll be very pleased in Number 11 Downing Street too. George Osborne, the Chancellor, knows he really needs to be able to demonstrate the economy is showing more than tentative signs of recovery if he wants to extend his stay there. Mr Carney may have improved his chances: no longer are monetary policymakers focused on reining in inflation regardless of how many people lose their jobs as a result. Now we're going for growth. Hooray!
At least up to a point. Mr Carney's bold move isn't quite as bold as it looks. While it is important as a statement of intent – and he seems to have quietly moved the inflation target up to 2.5 per cent from 2 per cent without actually saying so – there's nothing binding here.
He's pretty sure that the UK has enough spare capacity to create lots of new jobs – 750,000 will be required to hit his target – without really putting the wind into price rises but he's also made it clear that if the inflationary beast bears its claws he will act. Moreover, while that's a lot of jobs, the US is targeting an even more ambitious 6.5 per cent unemployment before its rates will be raised.
Mr Carney's move is still welcome. However, to ensure that some of the risks economists (who as a breed are almost as cynical as journalists) were warning about are mitigated it may require some joined-up thinking.
One of the benefits of his long-term interest rate policy is it provides businesses, and consumers, with a clear indication of the direction of travel to inform their decisions.
We might hope, therefore, that businesses will be moved to invest some of the cash they've been sitting on. We need to hope consumers don't party too hard.
The TUC has identified one troubling trend behind the recent upbeat economic statistics which have contributed to an impression that Britain is emerging from its long, sullen, economic malaise.
Much of the revival in consumer spending, evidenced by the buoyant July figures from the British Retail Consortium, has been driven by Britons raiding their savings. And perhaps, indulging in credit.
Consumers spending again; that has broadly been hailed as a good thing. But for the economy's long-term health, it would be better if they took the advantage of low rates to pay off some of the vast store of consumer debt that weighs on the minds of some economists and eschewed the temptation to leverage up.
Mr Carney can help by having a word with the Prudential Regulatory Authority (run by the Bank) and the Financial Conduct Authority. They need to ensure that banks, with their newly fat capital buffers, cleaner balance sheets and cheap money on offer to fund mortgages, check their customers can afford the debt when rates do start to rise. Or we'll be heading for trouble again.
As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”
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