Three problems with forward guidance

Steve Davies appears on BBC Radio 5 Live

Steve Davies discussed the Bank of England's new forward guidance strategy on Radio Five Live Drive.

Steve argued that Mark Carney's new plan is a bad idea for three reasons:

1. Forward guidance is very bad news for savers. If we go to 2016 without any rise in interest rates it will be longest period of record low rates since the Great Depression.

2. It is not clear that monetary policy is the instrument one wants to use to boost employment. If the government wants to produce higher employment it needs to produce genuine supply-side reform.

3. There is a real danger that with the economy improving, a sustained period of cheap and loose money will lead to higher inflation and a housing bubble.

Listen here. Segment starts at 2:09:48.