King warns against "jumping the gun" on Fed easing policy Markets have "jumped the gun" in thinking Federal Reserve guidance on money printing operations signifies an imminent return to more normal interest rates, Sir Mervyn King told MPs on Tuesday. In his last appearance at the Treasury select committee before the Bank of England governor retires at the end of the week, Sir Mervyn warned that governments around the world had not taken advantage of the recent extraordinary period of low rates to create a sustainable world economy. The outgoing governor's comments follow those on Monday of Richard Fischer, head of the Dallas Fed, who defied the "feral hogs" in markets who he thought were testing central banks. Sir Mervyn insisted that Ben Bernanke's comments on the timing of a dial back in US quantitative easing "will depend on the incoming data" and were not a definitive guide to the future path of interest rates. "Nobody will sensibly sit down today and say "this is the path of interest rates we will follow." That would be crazy," he said. Saying that central banks around the world were nowhere near the point of raising interest rates yet, he added: "I think people have rather jumped the gun in thinking this means an imminent return to normal interest rates; it doesn't." He said policy makers still had time to put in place policies that would allow rapid growth and a reduction in trade imbalances, but voiced concern at the lack of progress to date. I have been very disappointed by the failure of the world to put in place the policies that would create the conditions in which it would be desirable to return to a normal level of interest rates. Sir Mervyn outlined his reasons for voting in a 6-3 minority for more QE in Britain over recent months, saying the data show a recovery "to be in sight" but that it is too weak to reduce unemployment significantly. I think it is sensible to aspire to a recovery that will bring unemployment back to the sustainable rate over the two to three-year horizon. Mark Carney next week replaces Sir Mervyn and attends his first Monetary Policy Committee meeting. Three other members of the committee explained why they felt on balance that no additional stimulus had been needed. But in a sign that some might consider the market turmoil to be sufficiently significant to change their vote, Martin Weale, an external MPC member said, "I am very much looking forward to the arguments that the new governor will be making in the context of economic data which will certainly be different from those that we had in May." Sir Mervyn, however, did not make life entirely easy for the new governor who has stressed communications and additional guidance to the public over monetary policy as the new tool he wishes to introduce. The question of communications in my mind, although very important, is a second order problem compared with the question of how can we create the economic conditions so that the economy can get back to sustainable growth all around the world. Sir Mervyn also expressed his annoyance that the heads of banks had been lobbying politicians about negotiations with the new BoE prudential regulatory authority, its banking supervision arm, and leaking private discussions to the media. He also addressed concerns that there would be no historical female presence on British banknotes, when Winston Churchill replaces Elizabeth Fry in 2015. He revealed that the BoE's internal candidate as a replacement figure for any note was currently Jane Austen and she was likely to be the choice for the next £10 note.