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.
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