Mark Carney, governor of the Bank of England, will today reveal his ‘unconventional’ plans to safeguard Britain’s economic recovery.
Although it looks as though the economic recovery is building momentum, the central bank needs to keep interest rates low in order to stop higher borrowing costs damaging the economy.
Short-term interest rates are currently already at historic lows of 0.5%, making any lowering of interest rates unfeasible. Revealing the plan in its Quarterly Inflation Report today, the bank is expected to promise to keep interest rates at a set level until a level of economic improvement has been reached.
The measures, known as forward guidance, were requested by Chancellor George Osborne, who asked that the Bank of England consider unconventional methods of boosting the economy.
Markets are anticipating interests rates will stay low until at least 2015, and changes to this could have negative repercussions. Laura Lambie, senior investment director at Investec Wealth and Investment, told BBC Radio 4’s Today Programme: ‘If Mark Carney comes out and says something contrary to that then that’s going to have an impact on bonds and currencies – there could be room for disappointment.’