Bank of England. Photograph by Lonpicman
The new Bank of England governor Mark Carney has said that he would not consider raising interest rates until the number of people unemployed in the UK falls below 7%.
Currently 7.8% of the UK population is considered unemployed, with around 750,000 new jobs needing to be created to bring that below the 7% threshold before the Bank would re-examine the need to change the interest rate. Carney has said that this link with the unemployment numbers will hold unless inflation threatens to rise too quickly and affect the stability of the wider economy.
This move to publicise the Bank’s plans in advance follows both the US Federal Reserve and the European Central Bank, and is an attempt to allay fears that there could be an interest rate rise upon recent positive news about the UK economy’s return to growth picking up pace.
Whilst the economic situation may be improving, the UK economy has not yet regained its resilience and reaching an “escape velocity” said Carney. Continuing, he said:
“The legacy of the financial crisis means that the recovery remains weak by historical standards and there is still a significant margin of spare capacity in the economy, this is most clearly evident in the high rate of unemployment”
Speaking on the recovering economy, chancellor George Osborne recently said:
“Britain’s holding its nerve, we’re sticking to our plan, the economy’s on the mend.But still a long way to go”
