The Hottest Central Banker In The World Isn't Sold On NGDP Targeting
Carney's name has been associated with nominal GDP targeting – arguably the hottest idea in monetary policy right now, but something that has yet to be taken up by a major central bank.
In a speech in December, Carney talked up the concept, saying it "could in many respects be more powerful than employing thresholds under flexible inflation targeting," the latter of which is basically what is being employed by the Bank of England at present.
At today's testimony, Carney said that flexible inflation targeting was the best monetary policy in existence, and the bar for changing the inflation target is high. He also said there was some merit to considering "Fed-style" guidance at the Bank of England.
However, when asked to address nominal GDP targeting, Carney said that the policy had advantages "in theory" at the zero lower bound, but that he remained "far from convinced" that moving to a nominal GDP target is the right thing to do.
Carney even said that an economy in the U.K. economy's current position is where a nominal GDP target would work best, but qualified that by highlighting the need for the population to understand what the central bank is doing with nominal GDP targeting in order for it to work.
To conclude, Carney said flexible inflation targeting remains a superior alternative to nominal GDP targeting.
The WSJ's Simon Nixon summed it up best in a tweet:
Those hoping for Carney to bring the monetary policy revolution to the Bank of England may be a bit disappointed for now.