"Fear not for your mortgages!" they may have said, to paraphrase. "We promise that we will not raise rates until unemployment falls to seven per cent or below – at least not unless some really weird stuff happens like super-inflation or whatever."
Back then, in August, when the sun was shining and the days were long, unemployment was around 7.7 per cent and hadn’t been below the seven per cent mark for four and a half years.
All good. Kind of.
Except that unemployment has tumbled since. Thus, the unintended consequence of forward guidance has been to force the Bank’s senior rate-setters into a string of vehement denials that monetary tightening is imminent.
"Members saw no immediate need to raise Bank Rate even if the seven per cent unemployment threshold were to be reached in the near future," it says in the minutes of its latest meeting, released today.
The problem is this – folk don’t believe them. Carney & Co. could storm up and down Threadneedle Street waving placards saying "NO RATE HIKES", and still expectations would keep rising that – as the economy returns to something like "normal" – the normalisation of interest rates must be around the corner.
Over half of people expect interest rates to rise over the next 12 months, according to a Markit survey published today. This figure is now up to 57 per cent – and after today’s positive news on unemployment, who’s to say that two-thirds of Brits won’t soon believe that a rate hike is coming this year?
City investors are arguably even more convinced, with sterling continuing to climb (up from $1.49 last summer to nearly $1.66 today) and UK guilt yields following suit.
"The market is now pricing in the chance of a rate hike this year, and is essentially calling the Bank’s bluff once again," commented forex analyst Kathleen Brooks this morning.
"If the Bank believes that there are upside risks to its growth forecast and unemployment is falling sharply, why would it hold off from raising rates?"
It’s a good question. The Bank may stubbornly refuse to budge for a while yet, but if growth hits the levels predicted for this year, it’ll have to give in eventually.