The quarterly inflation report out today suggested the Bank of England could raise rates as early as the end of 2014 if unemployment continues to tumble and the economy improve.
Governor of the Bank of England Mark Carney commented Bank statisticians forsee a 40% chance unemployment will reach the 7% threshold by the end of next year. He added there is a 60% chance it will happen by the end of 2015.
Under the terms of Carney's Forward Guidance, the MPC will not consider raising rates until unemployment hits the 7% trigger.
He said: "Through that guidance we are giving businesses and households the confidence that interest rates won't go up until jobs, incomes and spending are recovering at a sustainable pace.
"In line with the unexpected strength of demand, the unemployment rate has fallen a little more rapidly than expected in August. That is to be welcomed: 100,000 more people are in work as a result."
Carney said the unemployment threshold is a staging post for assessing policy, not a trigger for an automatic increase in Bank Rate.
"When the threshold is reached, the MPC will set policy to balance the outlook for inflation against the need to provide continued support to the recovery in output and employment," he added.
With the recovery taking hold, our task now is to secure it, he said.
But he added that the bank will remain vigilant to risk to stability from the housing sector, in terms of price rises or household leverage.
No comments:
Post a Comment