April 18, 2013 / 5:00 PM / 5 years ago

Next BoE chief Carney praises Fed's guidance stance

WASHINGTON, April 18 (Reuters) - The next governor of the Bank of England praised the way the U.S. central bank has spelt out the likely path of interest rates, something British policymakers are due to consider in coming months.

Mark Carney, who will take over as Bank of England governor in July, said the Federal Reserve’s system of steering investors with numerical thresholds for unemployment and inflation was helpful as markets began to contemplate the end of massive central bank stimulus for economies.

“I think the value of the Fed’s ... guidance helps a lot with this,” Carney said at a Reuters Newsmaker event on Thursday.

“It helps market participants understand not exactly the timing of adjustment of interest rates but the minimum conditions before the Fed even thinks about adjustment of interest rates.”

Carney, who is due to stand down as governor of the Bank of Canada in June before moving to London to run the Bank of England, declined to comment on his views of the British economy and monetary policy.

Britain’s finance minister, George Osborne, has told the Bank of England’s top policymakers to report back to him in August on the merits of the steps taken by the U.S. central bank to convince markets that its massive help for the economy won’t be reined in too quickly.

The Federal Reserve said in December it would keep interest rates near zero as long as unemployment remains above 6.5 percent and inflation expectations do not hit 2.5 percent.

Osborne has asked what indicators might work in Britain.

The Bank of England’s current governor, Mervyn King, has opposed the idea of explicit guidance about the future direction of monetary policy.

Carney also stressed the need to proceed carefully with any pullback in the stimulus provided by central banks for struggling economies.

“The tools are there. It hasn’t been done before so I think there’s a need for humility around it and an appropriate caution there,” he said.

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