Bank of England governor Mark Carney on Thursday defended his plan to keep interest rates low for up to three years as MPs voiced concerns that it may be confusing the public and had failed to convince investors.

Carney said the central bank's policy of forward guidance was supporting the recovery and encouraging consumers and businesses to spend.

Under tough questioning from MPs on the Treasury select committee the new governor said the pace of growth was picking up, but remained in its early stages and could be knocked off course.

The fragile nature of the recovery, he said, meant there was no reason to bring forward interest rate rises, which have remained at 0.5% for the last four years. He insisted: "Overall, my view is that the announcement has reinforced recovery. It's made policy more effective, and more effective policy is stimulative at the margin."

Last month the BoE's monetary policy committee said that so long as inflation stayed under control it would only consider pushing interest rates to more normal levels once unemployment fell to 7%. The MPC forecast that unemployment would remain above the new target until the second half of 2016.

In a speech in Nottingham last month Carney said the target was a trigger point to discuss a rise in rates rather than a threshold that would immediately force a rate rise. He also outlined how three "knockouts", including a jump in inflation beyond 2.5%, would force the MPC to reconsider its low interest rate policy.

Several MPs said it remained unclear how the MPC will react to improvements in the economy. Some City analysts predict the unemployment rate will fall to 7% at least a year earlier than forecast by the MPC.

Andrew Tyrie, the committee's Tory chairman, complained that Carney's account of the Bank's new approach would be difficult to explain "down the Dog and Duck".

After the meeting he said: "Credibility in monetary policy is hard won and easily lost. The new framework – with its target, threshold and 3 'knockouts' – is more complex to explain than its predecessor. Rightly, the Bank is now engaged in bolstering credibility in its new framework with detailed explanations."

He added: "Confidence in monetary policy will be enhanced where those detailed explanations provide greater certainty about the likely responses of the Bank as circumstances change."

Andrea Leadsom MP said she was concerned that the MPC had "watered down" its inflation target.

"I am still slightly bemused how the inflation target ranks alongside the new unemployment target," she said.

Asked about the plight of savers, whose savings are being eroded by inflation with interest rates at rock bottom, the governor said he had "great sympathy", but the best thing the Bank could do to help was to generate a sustainable economic recovery.

"Our job is to make sure that that's not another false dawn, and ensure that this economy reaches, as soon as possible, a speed of escape velocity, so that it can sustain higher interest rates."

Carney stressed that despite the MPC's expectation that rates will remain on hold for up to three years, he would be ready to push up borrowing costs if necessary.

"I'm not afraid to raise interest rates," he said, pointing out that he is the only serving central bank governor among the G7 countries to have increased rates – in his previous post, in Canada.

City investors have pushed up long-term borrowing costs in financial markets sharply since the MPC announced its three-year pledge to leave borrowing costs unchanged at 0.5%.

But Carney, who was handpicked by George Osborne to kickstart recovery and took over in Threadneedle Street at the start of July, said the recent increase in rates, which sent 10-year government bond yields through 3% last week for the first time in more than two years, was a result of the recovery and "benign".

He also repeatedly refused to be drawn on whether the new approach represented a loosening of policy – equivalent to a reduction in interest rates – in itself. He said forward guidance made the current stimulus of low rates and £375bn of quantiative easing more effective.