"The press loves stories of forecast failures – especially at the expense of central banks. But dwelling on soothsaying errancy misses the point," says Payden & Rygel's Jeffrey Cleveland.

Two weeks ago, when challenged outright on the inaccuracy of the Bank of England's (BoE) unemployment rate forecast, Mark Carney suggested monetary policy is about addressing "overall labour market conditions," not about precisely forecasting one indicator (the unemployment rate). And indeed, last week the BoE whisked away what had formerly been an "unemployment threshold" of 7% as a signpost for policy.

But it isn't just the Bank of England. In the US, the Federal Reserve has also had to talk down their unemployment rate threshold for considering tightening policy.

Both the Fed and the BoE believe that, despite improvements in labour markets, sufficient "slack" plagues each economy and thus interest rates ought to stay low. At his press conference, Carney repeatedly highlighted the "spare capacity" in the UK economy, even as Janet Yellen worried earlier in the week at her Congressional testimony over the "output gap" constraining the performance of the US economy.

What's going on? The press loves stories of forecast failures - especially at the expense of central banks. But dwelling on soothsaying errancy misses the point. As Mr. Carney admitted in a 2012 speech, in order for forward guidance to work, "people must generally understand what the central bank is doing – an admittedly high bar." To lower the bar, central banks used the unemployment rate thresholds because they thought a substantial decline was some way off, "communicating" that rate hikes, too, were a distant possibility. So the unemployment rate threshold, which the public understands far better than a nominal GDP level or an inflation index level, is really a means to an end - a stopgap mechanism for central bank communications.

We arrive then at a deeper truth: it was never about the unemployment rate anyway. The unemployment rate was a tool. Rapid declines in both the UK and US unemployment rates scuttled its effectiveness.

Importantly for investors, this means that despite the improved unemployment rates, policy interest rate hikes are not imminent. Want a precise calendar date for "lift off"? The best guess depends on how long one judges it will take to squeeze out that space capacity, pushing inflation higher. Here's a simple guess to impress your friends at weekend cocktail parties: if we get 3% growth this year in the UK while the trend rate of growth is closer to 2%, the excess capacity could be all but gone by Q2 2015.

But, is 3% growth too ambitious? Or is the magnitude of spare capacity, itself a phantom concept, beyond the fathoming of Carney or Yellen? Time will tell.

What can we do? We'll watch the wage and inflation data for clues. If wages pick up, central bankers will infer that labour markets are tighter and the output gap is smaller, which should bring on tighter policy. For now, both central bankers have the upper hand in the argument. Wage growth and overall inflation remain quiescent. In the US, the key gauge of inflation followed by the central bank, the core Personal Consumption Expenditure (PCE), which incidentally excludes food and energy, hovers at just 1.2% year-over-year. In the UK, inflation dipped below 2% for the first time since 2009.

In the meantime, go easy on Carney. Or at least criticise him where criticism is warranted.

Written by Jeffrey Cleveland, principal and chief economist, Payden & Rygel