GO
Loading...

Carney 'misses a trick' as BoE holds rates

Mark Carney, governor of the Bank of England, at the bank's quarterly inflation report news conference
Simon Dawson| Getty Images
Mark Carney, governor of the Bank of England, at the bank's quarterly inflation report news conference

The Bank of England (BoE) kept its main interest rate and asset purchase target unchanged on Thursday, but surprised some market watchers by not issuing an in-depth statement along with the decision.

It came after governor Mark Carney left London on Thursday morning, to join fellow policy makers at the G-20 summit in St Petersburg, Russia.

The BoE's monetary policy committee (MPC) decided to keep the main interest rate unchanged at a record low 0.5 percent and said it would not add to its £375 billion ($571.6 billion) quantitative easing (QE) program.

Sterling rose against the dollar as the BoE held fire, and yields on U.K. Gilts moved higher, with the interest rate on 10-year notes rising to 2.966 percent.

(Read more: Carney's crunch speech: More stimulus possible)

All eyes had been on whether the central bank would issue a statement alongside its interest rate decision, in an effort to reassure markets over its controversial "forward guidance" policy. The BoE set a precedent at its July meeting by issuing a long statement, raising expectations of forward guidance.

Kathleen Brooks, research director at Forex.com, said Carney had "missed a trick" on Thursday by only releasing a "mini-statement" about technical details.

"The market would have preferred a more meaty statement to sink their teeth into, however that was not to be," she said. "We now have to wait for the minutes released later this month to get a better understanding of: 1. The MPC's view on the pick-up in economic momentum; and 2. The MPC's commitment to forward guidance to keep rates low for the long term in the face of a stronger economic back drop and strong inflation pressures."

(Read more: Don't bet on it: Gamblers take on central bank forecasts)

Howard Archer, chief U.K. and European economist at IHS Global Insight, added: "Interestingly, there was no statement from the MPC, despite its highly probable disquiet over a further rise in market interest rates."

The markets appear unconvinced by the BoE's forward guidance – that it would not consider raising interest rates until the rate of unemployment in Britain fell to 7 percent.

Since the policy was announced last month, gilt yields have climbed to multi-year highs and the pound has appreciated against the dollar, as signs of an improving economy boosted expectations that unemployment could fall faster than the bank expects.

(Read More: BoE split on forward guidance; unemployment steady)

Although there was no in-depth statement, a short release from the MPC said it had agreed to reinvest £1.9 billion of cash flows associated with the redemption of the September 2013 gilt held in the Asset Purchase Facility.

By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop

Contact Central Banks

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More