That Mark Carney effect in full

The new Governor of the Bank of England makes sweeping changes.

It's our favourite chart, and you can really see the effect new governor Mark Carney is having on the Bank of England.

In all seriousness, though, the Bank's announcement of the meeting of the monetary policy committee (MPC) did contain a bombshell, of sorts:

The implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.

In non-central-bank speak: "don't expect us to raise interest rates any time soon, because the economy is still in the toilet." What they're saying is almost less important than the fact that they're saying it at all, though. Interest rate decisions are normally passed down without any statement at all; we have to wait for the minutes of the MPC to be released a few weeks later to find out what was going through their heads. That pushes the statement from an explanation of their thoughts into active monetary policy in its own right. It is what's known as "forward guidance".

Monetary policy is, at heart, an expectations game. Interest rates, inflation, and even (to a lesser extent) the quantity of money matter because they change the decisions you make about how to plan for the future. If interest rates are low, you're likely to invest. If interest rates are low and likely to stay low, you're likely to invest more. If interest rates are low and the central bank is telling you they'll stay low for quite some time, well then, you may as well buy some stocks or build a bridge or something, because you aren't going to make any profit in a savings account.

Forward guidance is a very Carneyesque thing to be doing (although Mervyn King was no stranger to the concept himself), but there's two sides to the coin: making promises, and keeping them. This guidance isn't particularly controversial, merely stating what we all knew they were thinking; but it's useful to build up trust that when the Bank makes statements, they're statements you can bank on.

Update:

Fanfaronade adds to our translation. Though this metaphor is getting rather mixed now.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Sadiq Khan gives Jeremy Corbyn's supporters a lesson on power

The London mayor doused the Labour conference with cold electoral truths. 

There was just one message that Sadiq Khan wanted Labour to take from his conference speech: we need to be “in power”. The party’s most senior elected politician hammered this theme as relentlessly as his “son of a bus driver” line. His obsessive emphasis on “power” (used 38 times) showed how far he fears his party is from office and how misguided he believes Jeremy Corbyn’s supporters are.

Khan arrived on stage to a presidential-style video lauding his mayoral victory (a privilege normally reserved for the leader). But rather than delivering a self-congratulatory speech, he doused the conference with cold electoral truths. With the biggest personal mandate of any British politician in history, he was uniquely placed to do so.

“Labour is not in power in the place that we can have the biggest impact on our country: in parliament,” he lamented. It was a stern rebuke to those who regard the street, rather than the ballot box, as the principal vehicle of change.

Corbyn was mentioned just once, as Khan, who endorsed Owen Smith, acknowledged that “the leadership of our party has now been decided” (“I congratulate Jeremy on his clear victory”). But he was a ghostly presence for the rest of the speech, with Khan declaring “Labour out of power will never ever be good enough”. Though Corbyn joined the standing ovation at the end, he sat motionless during several of the applause lines.

If Khan’s “power” message was the stick, his policy programme was the carrot. Only in office, he said, could Labour tackle the housing crisis, air pollution, gender inequality and hate crime. He spoke hopefully of "winning the mayoral elections next year in Liverpool, Manchester and Birmingham", providing further models of campaigning success. 

Khan peroration was his most daring passage: “It’s time to put Labour back in power. It's time for a Labour government. A Labour Prime Minister in Downing Street. A Labour Cabinet. Labour values put into action.” The mayor has already stated that he does not believe Corbyn can fulfil this duty. The question left hanging was whether it would fall to Khan himself to answer the call. If, as he fears, Labour drifts ever further from power, his lustre will only grow.

George Eaton is political editor of the New Statesman.