Gauging Guidance
Judging by market impact alone, Mark Carney’s first public speech since his accession to the governorship was perhaps a disappointment. In his defence, the market had already heavily anticipated dovish remarks and some key MPC members have been assisting with ‘the message’ in the last two weeks. As such, it was very hard to deliver more: aside from some intra-speech volatility, sterling, forward swap rates and other metrics of BoE expectations ended the day broadly unchanged. Nonetheless, it is a work in progress and the BoE should take some execution guidance from the Fed. When gauging the success of its communication, it’s often as much about how the market reacts as the extent of the reaction itself.
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