Interest rates set to stay low for the foreseeable future

Mark Carney made his mark this morning. Moments ago, he opened his inflation report and issued his ‘forward guidance’, which is designed to make the markets aware of his long-term plans for interest rates. This is important because, although there are signs of life in the British economy (and Carney was cautious about them), inflation remains above the Bank of England’s target, the base interest rate remains rooted to the floor and unemployment remains high at around 8 per cent. There is also the question of Britain’s mounting debts, the answer to which will largely depend on how the bond markets react to this and other announcements. And then there is the prospect of further quantitative easing…

So, what happened? Channel 4’s Faisal Islam has some very helpful tweets of the headlines:

Basically interest rates remain at 0.5% until unemployment below 7%, expected 2016/2017… (Unless inflation surges)

— Faisal Islam (@faisalislam) August 7, 2013