No Interest Rate Rise

Unemployment has fallen to 7.1% - the lowest rate since March 2009. But this is not a sufficient trigger for the Bank of England to raise interest rates

Emma Wall 22 January, 2014 | 12:00PM

Unemployment has fallen to 7.1% - just 0.1% off the interest rate rise trigger of 7%. Despite this, the Monetary Policy Committee is expected to sit tight and hold interest rates at the record low of 0.5% for the 59th month in a row. 

On August 7 last year, Bank of England governor Mark Carney set out a plan designed to offer savers, borrowers and the City some stability regarding interest rates. Carney announced that the Bank would be implementing ‘forward guidance’, a policy that dictates certain economic goals must be met before interest rates could rise.

Although his speech was peppered with caveats, Carney promised that the Bank would not be raising rates until unemployment had fallen to 7% or less. That threshold is now within grasp - and yesterday we saw the International Monetary Fund upgraded its forecasts for UK GDP growth to 2.4% for 2014.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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