News — Mark Carney

Bank of England downgrades unemployment threshold

Bank of England Forward guidance Mark Carney Monetary Policy Unemployment threshold

The Bank of England has updated its forward guidance policy (12 February 2014) in the light of the December unemployment figures, which showed a sharp drop to 7.1% - just short of 7% unemployment threshold set n August. Despite the unexpected fall in the unemployment figures, the Bank estimates that there is still sufficient slack in the economy to keep interest rates at 0.5%.

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CPI inflation down to 2.1%

Bank of England CPI George Osborne Inflation Mark Carney Unemployment

More good news for the Chancellor and Governor of the Bank of England this week as the downward trend in inflation continued. November’s Consumer Price Index (CPI) grew by 2.1% in the year to November, down from 2.2% in October – just 0.1% off target.

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Bank of England's strategy revealed

Bank of Englan Mark Carney

So at long last its official – the Bank of England’s ‘forward guidance’ policy is now in the public domain meaning that UK base rates are as good as fixed at 0.5% for the foreseeable future, assuming unemployment does not fall to 7%, which remains highly unlikely in the medium term. Although the ‘gap’ between the current unemployment rate of 7.8% and the likely automatic intervention rate of 7% seems relatively small beer, the last four years have seen unemployment remain stuck  between 7.8% and 8.4%, and the last time unemployment was below 7% was back in the first quarter of 2009.

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