One of the benefits of forward guidance that the MPC is counting on, and has trumpeted, is that it will reduce uncertainty about future interest rates. Lower uncertainty should increase spending as economic agents need to put less aside to see them through potential scenarios for high interest rates, which would mean high cost of servicing mortgages and other debt.
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The supposed benefits of reducing uncertainty…
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One of the benefits of forward guidance that the MPC is counting on, and has trumpeted, is that it will reduce uncertainty about future interest rates. Lower uncertainty should increase spending as economic agents need to put less aside to see them through potential scenarios for high interest rates, which would mean high cost of servicing mortgages and other debt.