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BoE's Carney defends forward guidance against accusations of 'cluelessness'

FXStreet (Łódź) - During the briefing following the release of the BoE's Quarterly Inflation Report, governor Mark Carney faced accusations of not having a clue on how to adjust monetary policy in the face of the ongoing economic surprises in the UK economy.

The comments were brought about the governor's remarks that there is “tremendous uncertainty” about the degree of slack in the UK economy.

Carney also declined to specify the timing of the first rate hike, signaling only that "bank rates need to rise as the economy normalizes," and once they do the process will be gradual and limited.

Furthermore, Carney said that productivity and real incomes have disappointed. He stated that the MCP has no threshold for wage growth and that it would continue monitoring data.

The BoE head also listed to geopolitical tensions and overseas financial tightening as the main risks for the UK economy. As far as the slowdown in the UK housing market is concerned, Carney saw it brought about by new FSA mortgage rules is for the most part transitional, possibly coming to an end. "Sterling strength is a headwind to exports," he added.

During Carney's speech the pound dropped to a 10-week low against the greenback, by 0.45% on the day, to 1.6732.

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