An early increase in borrowing costs was ruled out by the governor of the Bank of England as he insisted that this week’s faster than expected fall in unemployment will not lead to an automatic interest rate rise that might choke off the recovery.
All but burying his “forward guidance” policy of linking an interest rate rise to a fall in the rate of unemployment to 7%, Mark Carney vowed to keep borrowing costs at their record low of 0.5% for the time being. He was speaking a day after it emerged that the unemployment rate fell to 7.1%.
Interviewed on BBC’s Newsnight, Carney rejected the idea that plunging unemployment was a headache for the Bank. “If our forecast is going to be wrong it’s better to be wrong in that direction,” he said.
Carney also said that when the Bank decided to raise interest rates for the first time since the onset of the financial crisis in 2007, the moves would be gradual.
via The Guardian