Bank of England (BoE) Governor Mark Carney reiterated on Friday that while the bank's forward guidance policy could evolve, it was not in any hurry to hike rates, following widespread speculation that it could amend or even abandon its policy as the U.K. economy shows signs of improvement.
"The Bank's assessment of how to evolve guidance to changing circumstances will begin in our February Inflation Report," Carney told business leaders in at the World Economic Forum in Davos, Switzerland, according to a pre-released copy of his speech.
"The monetary policy committee (MPC) will consider a range of options to update our guidance, recognising both what we have learned about the behaviour of aggregate supply in the economy as well as the more benign inflation outlook."
Sterling fell to a session low of $1.6563 after Carney's comments, from $1.6614 beforehand.
Carney's remarks come as speculation mounted that the policy of sticking interest rates to the U.K's unemployment figures might be unraveling. Data this week showed that the U.K. unemployment rate in December fell to within a whisker of the bank's target of 7 percent at which it had previously suggested it would consider raising rates.
Once again, however, Carney said that the unemployment target was not a "trigger" for raising rates. "Even though unemployment is falling faster than expected, the recovery has some way to run before it would be appropriate to consider moving away from the emergency setting of monetary policy."
"A few quarters of above-trend growth driven by household spending represent a good start, but they aren't sufficient. It will take sustained growth, more balanced demand and a recovery in the supply side for advanced economies to break free into a more normal universe," his speech noted.
"In the U.K., the question is whether labour productivity will reverse any of its poor performance," Carney said, adding that the limitations of central banks included not knowing how much capacity was destroyed following the crisis, why productivity growth had slowed or indeed when it would pick up.
"By this point, buffeted by gloom and uncertainty, you may be considering joining the bankers in pushing me off the mountainside," he said, alluding to criticism that he has not given clear enough guidance as to the central bank's policy going forward as U.K. macroeconomic data continues to improve.