Sterling rose to an eight-month high on Wednesday after official data showed unemployment had fallen from 7.8% to 7.7% in the three months to July.
The improvement has led some investors to believe that the Bank of England may have misjudged its forecasts for when a future rate rise will be on the cards, and that action could be taken as soon as next year.
Under ‘forward guidance’, a strategy introduced by Carney to deliver explicit guidance regarding the future conduct of monetary policy, the Bank said it would not consider raising interest rates until the unemployment rate has fallen to 7% or below, which it did not expect to happen until mid-2016.
Carney and the BoE’s Monetary Policy Committee have since come under criticism for the pledge, as improving economic indicators could have a dramatic impact on the unemployment rate.
The Financial Times reported on Wednesday evening that some members of the MPC privately say they are concerned by the bank’s stance as forward guidance has been linked to a volatile measure rather than any specific date.
But MPC member David Miles defended the policy at an academic event in London on Wednesday, labeling some of the criticisms “bizarre”.
“Forward guidance is really just giving information on the likely reaction function of the MPC in a situation where the recovery might be starting, but only just starting,” he said.
He added he thought the public understood that, should a recovery happen quicker than forecast, interest rates might rise significantly before mid-2016.
