Outlook The financial markets never cease to behave like over-indulged toddlers. They weep and bawl at the smallest slight, cheer and whoop at the tiniest victory.
Their reaction to Mark Carney yesterday was typically hysterical.
The Bank of England Governor did pretty much everything he could to guide that interest rates were staying low for the forseeable future, yet the pound, the yield on government bonds and the markets for future interest rates known as short sterling leapt as if he'd just fired up a cost-of-borrowing klaxon.
Their justification seems to have been the Bank of England's forecasts of speedy 3.4 per cent growth – effectively ripping up the predictions made just three months ago.
But they totally ignored his clear verbal signals that he's not upping rates any time soon. Did they not hear him banging on about the fact that inflation was low, that the pound's strength would hamper exporters, that economic headwinds would persist?
The City's attention deficit disorder brigade also leaped up and down over the fact that he'd changed his forward guidance rules. True, obviously. And the Governor does look like he's squirming over what was clearly a huge about-turn.
But why is he performing these contortions? To give himself an excuse to keep the lid screwed tightly down on interest rates. Homeowners and businesses should ignore the tantrums of the manic markets and take that message.Reuse content