This week the new governor of the Bank of England, the Canadian Mark Carney, presided over his first Monetary Policy Meeting. He inherits a mixed situation to say the least. At 2.7% in May, inflation has not met the BoE’s 2% target even once since December 2009. Over the same period, UK GDP growth was less than 1%, which is only half the growth rates of the United States (1.7%), Canada (2.5%) and Germany (2.6%). Opting to maintain the status quo this time, Mark Carney stood apart from his predecessor as of day one by publishing several paragraphs of commentary to justify the MPC decision. Among other factors, the committee signalled that expectations of an increase in the Bank Rate by 2015 were not warranted by the recent developments in the British economy. On the other side of the Channel, Mr. Draghi adopted a similar stance at the end of the ECB Governing Council meeting. For the first time, he pledged to maintain key rates at current or lower levels for “an extended period of time”. This coinciding forward guidance arrives at a time when the Fed has signalled that it soon intends to slow down the pace of its monthly securities purchases, which triggered a tightening of financial conditions across the eurozone. The European equity markets were not fooled, however, and the euro and sterling declined against the dollar.


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