A New Broom

The new Governor of the Bank of England, Mark Carney, has made a rather dramatic statement this week.

Now, this has to be seen in the context of the glacial and secretive world of Central Banks, where every apostrophe in every sentence is scrutinised for hidden meaning or subtle change of emphasis.

Just recently the mere hint that the Federal Reserve Bank of the United States would reduce (taper in Central Bank speak) its policy of supporting the US economy by buying up Government bonds, led to a vicious market sell-off that caused an immediate change of tone from the guardian of the nation’s finances in an effort to return some calm to global stock markets.

So, what was this dramatic statement uttered by Mr Carney? Well, he revealed that going forward the Bank of England would tie its monetary policy (effectively setting of interest rates) to the performance of the economy as represented by the level of unemployment

To put some timescale to this it is unlikely that the 7% unemployment rate that Mr Carney suggested was the trigger, will be reached until late into 2016.

During the speech he made sure that he poured cold water on recent talk that the economy is heating up and beginning to race away, by confirming that this recovery is among the weakest in history, thus indicating that whatever the actual date of a change in interest policy, it is going to be a long way off.

Small and medium-sized businesses sit in the very middle of all this. On the one hand being told that interest rates have never been lower and that they should borrow more to fuel investment and profits, while at the same time contending with a weak and fragile economy into which they have to try to sell their wares.

Mr Carney is in one sense in a similar position to many of the UK’s business owners. Faced with conflicting information and meddling politicians he will just have to get on with the job as best he can and hope that he is given enough time to let the economy heal on its own terms.