Critics of the Bank of England who demand more detail on the future path of interest rates do not realise how hard it is to predict economic movements, policymaker David Miles said last night.
The Bank has set out rough guidance, telling markets that interest rates will only rise slowly and will stay below pre-crisis levels.
But it has faced calls for more detail on when rates will start rising, and been accused of flip-flopping by changing the criteria on which the rise is based. A year ago the Bank of England said it would consider a rate hike when unemployment fell below seven per cent – but it is now waiting well beyond that point.
“Men plan and God laughs,” Miles told the London School of Economics.
“Currently, it might be just as useful – and probably less misleading and possibly even more accurate – to give forms of guidance which are more qualitative, such as: interest rate rises will probably be gradual and likely to be to a level below the old normal.”
“That says something substantive; and most people can understand it.”