Mark Carney to rethink guidance on interest rates
Published 10/01/2014 | 08:30
The Bank of England has kept interest rates on hold at a record low of 0.5%.
The Bank pledged last year not to consider a rise until the unemployment rate falls to 7%, as part of efforts to support the UK's recovery.
Rates have stayed at the rock bottom level of 0.5% since March 2009, while the Bank has also pumped £375bn into the economy under its quantitative easing programme to spur on growth.
But the strength of the economic revival in recent months has led to widespread speculation the Bank will have to tweak its forward guidance to stave off a rate hike. Economists predict Bank governor Mark Carney will lower the unemployment target for considering a hike in the cost of borrowing as early as next month.
When he announced the new forward guidance policy on rates, the Bank predicted unemployment would not fall to 7% until 2016. But unemployment has been falling faster than expected – down to 7.4% in October – as the recovery gains traction, so the threshold could be hit far sooner.