In most spheres of life, telling people what you’re going to do for the next few years does not sound like a big innovation. But the communication of future moves on interest rates made by central banks has the ability to send financial markets wildly higher or lower.
The idea of “guiding” the markets, consumers and businesses on the future path of interest rates was pioneered by Mark Carney during his time as governor of the Bank of Canada. With Mr Carney now in place as governor of the Bank of England, many are expecting him to replicate a form of this “guidance” policy in the UK when he presents his first Inflation Report on Wednesday.
So what is the evidence of the success of the policy in Canada?
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