At the Bank of England, not everyone agrees with Mr Carney

A Bank of England rate-setter yesterday said that Threadneedle Street's flagship forward guidance policy was likely to have had little impact on the economy and appeared to clash with Governor Mark Carney over the timing of possible rate rises.

The Bank said in August that it would not raise interest rates from their record low 0.5 per cent before unemployment – currently at 7.6 per cent – falls to 7 per cent, subject to "knockouts" on inflation, financial stability and inflation expectations staying under control.

The Monetary Policy Committee's Martin Weale, who was the sole rate-setter to raise objections to the framework when it was adopted in August, said in a speech to the National Institute for Economic and Social Research that "the policy has been a modest stimulus – not probably a large stimulus – to the economy".

Mr Weale said that if the guidance succeeded in pushing back public expectations of an interest rate rise by one year, it could boost output by as much as 0.75 per cent. But he immediately qualified this by saying the initial effect would be likely to be "appreciably smaller" than that, as some members of the public would not have taken on board the shift in central bank policy.

The economist also struck a more hawkish tone on potential rate rises than Mr Carney, who has been keen to stress that guidance is a threshold for considering a potential tightening of policy rather than a definite trigger for action: "My own view is that if unemployment is falling rapidlywhen it drops to 7 per cent, that will be an indication that demand is strong relative to supply, strengthening the case for an early rate rise." The Bank's forecasts put unemployment potentially hitting the 7 per cent threshold in the final quarter of next year – a full 18 months sooner than when it unveiled the policy in August. Mr Weale refused to speculate further on when rates might rise, saying: "Other things being equal, good news on underlying inflation reduces the case for tightening."

He also appeared to contradict Mr Carney's recent comments that without forward guidance the "discussion would have been... is the bank going to raise rates today?" Mr Weale said: "I find it inconceivable that, without forward guidance, I, or any of my colleagues, would have already voted to raise Bank rate and that the only thing that has stopped us is forward guidance."

Mr Weale's comments came as British households again brought forward their expectations of when the Bank will start to raise interest rates, according to financial data provider Markit's latest snapshot of attitudes. In its December poll, some 30 per cent expected the Bank to start raising interest rates within the next six months, up from 25 per cent in November and just 17 per cent back in August. The proportion expecting the Bank to raise interest rates within the year also rose sharply in December, up from 47 per cent in November to 55 per cent.

Markit's chief economist Chris Williamson said: "The Bank's recent communications that they will use tools other than interest rates to manage the economy appear to be falling largely on deaf ears, suggesting that the Bank needs to shout louder and more convincingly.

"However, it will also be important to see how households are responding to the prospect of higher interest rates. If consumer spending holds up in the face of the potential tightening, policymakers may become less nervous of the impact of higher interest rates."