While the 64 economists polled this week were unanimous in saying
the Bank Rate would be left unchanged at a record low of 0.5 percent
on March 6, there was no consensus on what they thought of Governor
Mark Carney's updated guidance.
While inconclusive, this shows how tough it is for markets to make
sense of the new policy, which is more complex than the previous one
but aimed at reducing uncertainty over the timing and speed of any
future interest rate rises.
Within six months of tying monetary policy to joblessness, the
central bank was forced to abandon its initial plan after
unemployment fell within a whisker of its 7 percent target three
years earlier than when they first forecast it would.
Instead, it said earlier this month it would focus on 18 separate
measures of data in order to gauge the right time to start raising
Twenty-five of the economists who answered an extra question said
the new guidance provided more clarity on the Bank's monetary policy
path but 22 said there was less clarity.
"The previous incarnation of forward guidance was flawed but at
least we knew what the BoE was looking at," said Peter Dixon at
Commerzbank, one of the dissenters.
With the Bank focusing on measures including spare capacity in
Britain's economy, business surveys and the number of hours worked,
economists said it gave the BoE more room to operate but would also
make it harder to guess the next moves.
"It's good for them to be flexible. I don't think they can give
clarity about what they are going to do with interest rates down the
road," said Michael Saunders at Citi.
Saunders had one of the most aggressive calls for additional
quantitative easing - or stimulus - before the focus switched to
tightening policy. He is now one of the few economists who expect a
rate hike this year.
"I don't think it's a bad thing that they are not over-promising
what they can do," he said.
[to top of second column]
The Bank has stressed there is no rush to raise interest rates.
Earlier this month it suggested that expectations for a hike in the
second quarter of 2015 would be consistent with keeping inflation at
its 2 percent target.
As in the last several Reuters polls, that was when the first 25
basis point hike in Bank Rate was predicted to take place, followed
by a similar move in the third quarter.
But Monetary Policy Committee member Ian McCafferty told Reuters
this week uncertainty over how Britain's economy will perform in
coming months means the chances the BoE will move either earlier or
later were "reasonably well balanced.
The economy - still smaller than before the financial crisis began -
grew 0.7 percent in the final quarter of last year, taking full-year
growth to its fastest pace since 2007, as business investment and
trade picked up.
Accelerating business investment is essential to securing
long-awaited growth in productivity, according to the BoE, and is
something it expects to happen this year.
It has linked low interest rates to the amount of spare capacity in
the economy, which is something that is very difficult to estimate
and virtually impossible to measure.
Still, only six are forecasting a rate move this year, with a median
30 percent chance of a rate hike happening based on all respondents'
answers to a question on probability.
That median probability jumps to 80 percent for a hike before next
year ends and a near-certain 95 percent that the Bank will have
raised rates by the end of 2016.
(Additional reporting and analysis by
Swati Chaturvedi and polling by Diptarka Roy Editing by Jeremy
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.