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Carney tipped to cut unemployment rate rise threshold to 6.5%

by Dylan Lobo on Jan 06, 2014 at 07:57

Carney tipped to cut unemployment rate rise threshold to 6.5%

Speculation is mounting that Mark Carney will alter his policy to enable interest rates to stay lower for longer following the sharper than expected fall in unemployment.

Last summer the Bank of England governor said rates would not rise until unemployment fell to 7% as he ushered in a new era of forward guidance. The move was designed to encourage people to borrow and spend more with the assurance that rates would stay low for a long period.  

However, as the Bank’s monetary policy committee prepares for its first meeting of the year later this week there is talk Carney will change this threshold to 6.5%.

This change in tack has been prompted by the sharp fall in unemployment in the last three months of 2013, which saw the jobless rate fall from 7.6% to 7.4%. With inflation remaining subdued and the economic recovery gathering momentum there is no pressure for a rate rise in the near future.

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