The decision in the past few weeks of Governor of the Bank of England Mark Carney to revise his 'forward guidance' on interest rates has been portrayed as an embarrassing about-turn by some. Others, including Mr Carney himself, have quite plausibly argued that his approach has managed expectations effectively. Thus far the markets, the media and politicians seem inclined to believe him.
The new forward guidance is complicated, but the message is clear. As The Economist said on 15 February: "Financial markets now expect interest rates to start rising in April 2015. Without forward guidance they would have expected a move far sooner". So far so good. But one month before a tightly fought general election would be a very challenging time to increase the cost of money. Without further finessing that April date will loom like an iceberg over markets and over politics, sending shivers down the spine of Chancellor George Osborne and the Prime Minister in particular.
The Tories are of course desperate to win the next election - and to judge by the stories in the Telegraph last week, they will be looking for a decisive win. There is no chance of that unless voters are feeling the economy is on the up and they are feeling the benefits in their own pockets. Hikes in mortgage payments with a few weeks to go would not go down well. So the Government will be keen to ensure nothing changes until June 2015 or later. No matter how virtuous everyone's intentions it seems certain that the much vaunted independence of the Bank of England will come under severe pressure in the run up to April 2015.
So: stand by for a fudge. Mark Carney has talked about there being spare capacity in the UK economy, maybe worth 1-1.5% of GDP, which has to be used up before rates rise. What is the betting that this capacity is run down just a little bit slower than first thought, to push back the day of reckoning until after the election? And if that happens, no matter whether for good reasons or not, Labour won't like it one bit. The Bank of England might want to stay above politics but if markets really expect rates to rise in April 2015 it is surely in danger of being dragged into the mire.