Wayward guidance: More Britons than ever don’t know where rates are headed

December 11, 2015

So much for forward guidance. The largest proportion of Britons on record — almost a quarter — have “no idea” where interest rates are heading over the next 12 months, according to the Bank of England’s quarterly survey of the public’s views on the economy.

While most headlines pointed to the fact that the number of people expecting a rate hike slipped to the lowest level in two years, there were some surprising details in the latest BoE/GfK Inflation Attitudes survey.

BoE inflation
After nearly seven years of rates at a record low 0.5 percent, some 24 percent of respondents to the BoE/GfK Inflation Attitudes survey said they had no clue where interest rates were heading, the biggest chunk since the survey started 16 years ago.

The proportion of people who answered “no idea” to questions about what interest rate moves would be best for the economy, or respondents personally, also matched record highs.

These figures probably won’t surprise economists, some of whom might secretly answer “no idea” about the outlook for interest rates. One lawmaker compared BoE Governor Mark Carney to an “unreliable boyfriend” because of his shifts in rhetoric surrounding the outlook for interest rates over the past couple of years:

  • June 2014: “There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect.”
  • July 2014: “We don’t know exactly when the rate cycle is going to start. It will be driven by the data.”
  • May 2015: “”It’s possible (rates will be higher this time next year), but it depends on the evolution of the economy.”
  • July 2015: “In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.”
  • November 2015: “(We’ll) have to see what transpires both domestically, but as we are reminded repeatedly what matters as well is what happens beyond our shores and the impact of that on inflation. We’ll take our decisions at the right time.”
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