UK / Interest rates to be held at record low until unemployment falls below 7 pc

MARK Carney, the new governer of the Bank of England, today vowed to keep the interest rate at 0.5 per cent until at least the end of 2016 unless inflation rises sharply.

NEW Bank of England governor Mark Carney gave households and businesses a boost today as he said interest rates will remain at their record low until unemployment falls below 7per cent.

Unveiling a new strategy of forward guidance, the Bank said rates will remain at 0.5per cent until at least the end of 2016 unless inflation rises sharply.

Mr Carney said that “a renewed recovery is now under way” as the Bank predicted 0.6per cent growth in the third quarter and said inflation is unlikely to rise above 3per cent this year – lower than previous fears of a peak of around 3.5per cent.

The Bank also pledged not to scale back its £375 billion economy-boosting programme of quantitative easing (QE) while unemployment remains above 7per cent.

Mr Carney said unemployment falling to 7per cent would mean more than 750,000 UK jobs are created, which, combined with rising wages, would represent “real improvements in the lives of people across the nation”.

He said the Bank looked at the range of measures in deciding to link rates guidance to unemployment.

He added unemployment was chosen as “people running businesses and individuals across the country understand the conditions under which the Monetary Policy Committee (MPC) would begin to consider the withdrawal of stimulus.”

Unemployment is running at 7.8per cent, according to the latest official figures, and the Bank predicted it will remain above 7per cent until at least the third quarter of 2016, as far as its current forecast goes.

This signals that rates will therefore remain at historic lows for at least another three years.

Chosen excerpts by Job Market Monitor. Read the whole story at 

via Interest rates to be held at record low until unemployment falls below seven per cent – Daily Record.