Carney revises Bank of England forward guidance as unemployment eases

Bank of England Governor Mark Carney is expected to announce today an overhaul of the bank’s forward guidance policy on interest rates as unemployment in the UK eases rapidly.

The flagship policy, which was only introduced six months ago needed to “evolve”, Carney admitted in a speech to business leaders at the world economic forum in Davos last month.

Under the guidance, the bank had said it would not consider a rise in interest rates from their current low of 0.5% until unemployment had fallen to 7%. However, as the job market has picked up, the 7% figure is likely to be reached much more quickly than predicted.

When the bank announced the policy, it didn’t expect to see 7% unemployment until 2016, but latest figures show that the current rate of joblessness has fallen to 7.1% - very close to the threshold.

Carney is expected to change the bank’s forward guidance policy to indicate that despite the fast fall in unemployment, interest rates will not yet rise and a broader set of measures will be taken into account before an increase is considered.

In his Davos speech last month, Mr Carney said the recovery had “some way to run” before any interest rates increase could happen.

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Readers' comments (1)

  • The view of Carney - as like many other politicians whose feet fail to be on the ground... in pairs - is always a simplistic one.

    These people are so fearsome of the reality on the ground - as they continue to preach from their Ivory towers. Apparently crime has reduced, but we see new leaflets of warning of heightened mobile phone theft in our communities.

    Surely, the focus has to also be on achieving Fairness and justice - as well as raising the threshold to promote the desire of an Aspiration Nation, once again. Is that going to far above and beyond our goals or straying too ghastly off key?

    I promise you, going way beyond what Mr Carney and our political elite continue to preach as a Success in employment and Aspiration goals, is exactly what 'ordinary' hard working and goal-seeking people desperately need.

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