Forward guidance is a misguided policy

The Times features comments from Philip Booth

Markets were cautious about the Bank’s direction of travel. The FTSE 100 extended its recent losses and slipped by about 1 per cent to 6,539 points in lunchtime trading.

Professor Philip Booth, an economist at the Institute of Economic Affairs, a free market think tank, called Mr Carney’s strategy “misguided and dangerous”.

He said: “Monetary policy should be designed to ensure that we have stable prices. The level of unemployment is mainly determined by a range of factors, such a labour market regulation, the benefits system, tax rates and so on.

“To try to use monetary policy to reduce unemployment when inflation is already above target is playing with fire and could lead us down the road that we followed in the 1970s.”

Read the full article here (£).

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