Bank of England Governor Mark Carney said on Thursday that there was no immediate need to raise interest rates and people should not assume the central bank will tweak its unemployment threshold, which looks as if it will be breached soon.
Carney’s comments to the BBC were his first since data on Wednesday showed Britain’s unemployment rate fell to within 0.1 percentage points of 7.0 per cent, the level at which the Bank has said it will consider raising interest rates. The faster-than-expected drop in unemployment has sparked speculation that the Bank might rework the guidance.
“There is a broad range of things that we could do. I wouldn’t jump to that conclusion, though,” Carney told the BBC when asked if the threshold would be changed.
“First off, it is a decision of the entire Monetary Policy Committee, and secondly, what we are trying to get across ... is that it’s really about overall conditions in the labour market, overall amount of slack in companies and that’s what affects it,” Carney said. “So we wouldn’t want to detract from that ... by unnecessarily focusing too much on just one indicator.”
The “forward guidance” policy adopted by the Bank last August linked interest rate decisions to the rate of unemployment for the first time since the Bank adopted an inflation-targeting mandate.
But the plunge in the jobless rate toward the 7-per-cent unemployment rate level has prompted the Bank policy makers to stress they are looking at a broad range of data when deciding on monetary policy.
Meanwhile, inflation has fallen within its target, easing the pressure on the central bank to withdraw monetary stimulus as the economy stages a recovery which was one of the fastest among industrialized nations last year.
Carney also said Britain’s economy was “coming off a low base” and that it had not recovered to its 2008 levels.