Mark Carney today presided over what many are reporting in the press as a major shift in Bank of England policy, namely giving (of a kind) ‘forward guidance’ for interest rates.
I am not sure this is ‘forward guidance’ in its truest sense, but it does I suppose give an indication of what the bank are looking at achieving before they even consider hiking up the rates. Albeit the obvious exceptions apply such as inflationary pressures, etc. but clearly nonetheless today’s action must surely alleviate the concerns of many that the recent economic improvements will necessitate an immediate rate rise anytime soon.
However from a personal perspective, while it may be great for mortgages and arguably the economy, what if anything does this form of ‘forward guidance’ now mean for us investors and the UK stock market.
With savings rates now looking like they are going to be nailed to rock bottom rates for even longer, it should surely mean that the only logical place for free cash to go, is still anywhere other than traditional savings accounts, one of the most attractive options must surely be equities.
Longer term though, will we be setting ourselves up for a fall, (i.e. when this policy and the quantative easing is wound down, and rates inevitably rise). Are we creating a kind of equities bubble, are we ignoring inflation for growth, only to create further issues down the line.
Certainly lots to think about these coming months, and lots to observe on the markets. Interesting times…