BoE Governor Says Unemployment Does Not Dictate Rate Hike

The Bank of England will be in no hurry to raise interest rates even when unemployment falls to the 7 percent level it has set as a threshold to consider tightening monetary policy, Governor Mark Carney said on Tuesday.

“Seven percent is a threshold, not a trigger,” he told parliament’s Treasury Committee.

Carney, responding to a question from one of the lawmakers, said it was a “total failure of logic” to suggest that the BoE’s new policy of forward guidance was dead on arrival.

The BoE took a new approach to nursing the economy back to health in August when it said it would not consider raising record-low interest rates until Britain’s unemployment rate fell to 7 percent.

Since then, unemployment has come down faster than the BoE had expected – it hit 7.6 percent in the three months to September – raising questions about the duration of its interest rate pledge.

Half of economists polled by Reuters have said policymakers’ handling of forward guidance has damaged the credibility of the bank.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza