Having spent the last five years providing as much slack as possible to keep the banking system on its feet and the economy off its deathbed, there is now a new mood and doctrine. When Mark Carney arrived in the UK in July last year he promised us Forward Guidance on interest rates – he would hold rates at 0.5% until we achieved full employment. So like a seasoned skipper he turned the yacht downwind and let all her sails out. The economy (helped by a friendly gust of overseas investment) has picked up speed, employment rates have shot up and people are wondering when we will need to tighten things up. If we don’t tighten things up and the economic tail-winds pick-up we could get into a real mess.
|He should have tightened up a bit earlier|