Bank of England's Fisher says forward guidance may smooth stimulus exit

LONDON, July 16 Tue Jul 16, 2013 8:19am EDT

LONDON, July 16 (Reuters) - Giving markets clearer guidance about when interest rates will rise may help the Bank of England steer a smoother exit from exceptional stimulus measures, a top policymaker said on Tuesday.

However, Paul Fisher, one of the most dovish members of the Bank's nine-member Monetary Policy Committee, said an exit might be several years away and the current debate was about whether or not to give more help to the economy.

"I should say that all the discussions that we're having at the moment are more about whether we should be giving forward guidance and using thresholds, whether we should be giving more stimulus, rather than discussing what the exit strategy will be," Fisher told a parliamentary committee on Tuesday.

Fisher acknowledged that selling back to the market much of the large volume of gilts it bought under its quantitative easing programme would be a challenge.

"I am reasonably optimistic that we can get this right if we are clear and transparent about what our intentions are. It's possible forward guidance may help."

Britain's central bank indicated earlier this month that markets had got ahead of themselves in pricing in higher rates, and is debating whether to adopt forward guidance in a more formal way.

Mark Carney, who took the helm of the central bank at the start of the month, adopted a form of forward guidance when he was governor of the Bank of Canada and is thought to be keen to adopt the formula here.

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