Mark Carney is gambling with his credibility

Risky, risky, risky.

In a dramatic break with history, at his first meeting as Governor,  Mark Carney persuaded the Bank of England’s, (BOE), Monetary Policy Committee, (MPC), to issue what amounted to forward guidance on the path of future monetary policy.

The key sentence in the statement issued by the MPC was, "The, (recently observed), significant upward movement in market interest rates, would, however, weigh on that outlook; in the Committee’s view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy".

There are arguments against, and arguments in favour of forward guidance. Against the guidance ties the committee’s hands and will make it look stupid if it subsequently has to adapt it too quickly, (almost by definition), and if it does have to change the message, that’s going to lead to ever-diminishing credibility for future guidance, i.e. the market will remember the committee’s ‘mistakes’ and not believe future guidance.

For: it represents "costless" intervention, in the narrow sense that the central bank doesn’t have to actually DO anything right now and, if the guidance does have to change direction later, then that will probably be because the initial guidance has done its work - having lead to the desired economic adjustment.

The substance of today’s messages from both the BOE and the European Central Bank, (ECB), which used a similar tactic, was that they had seen their yield curves steepen dramatically since the market became obsessed with "tapering" in the US-the process by which the Fed may wind down its programme of Quantitative Easing, and that they could neither understand this phenomenon nor stand idly by and watch it happen. To paraphrase their message- "never mind the US, or the Fed, look at our economies and ask yourself, why would you expect us to raise rates any sooner now than you did two months ago". Fair enough and, in the ECB’s case, a very good point.

However, I think Carney has started his encumbency with a very risky gamble. Whilst the Eurozone economy has been flatlining and boasts economies best described as ranging from zombie to plunging, the UK economic data has recently given us some distinctly pleasant surprises - the latest being the Services Purchasing Managers’ Index-representing a massive sector of the economy- and quite a robust housing market recovery. Let us also not forget that UK inflation remains stubbornly high and shows no real tendency to fall. Maybe not today, maybe not tomorrow, but probably by Christmas, I think the BOE will have to subtly change today’s attempt at guidance and investors who bought gilts on the back of today’s BOE statement may come to regret that before long.

Bank of England Governor, Mark Carney. Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.