Bank of England ties rates to jobs
Print Edition
Bank of England Governor Mark Carney yesterday said the United Kingdom’s central bank will not consider increasing its record-low interest rate or scaling back its bond-purchasing program until unemployment falls below 7 percent.
Carney, delivering his first quarterly inflation report since he became governor, issued “forward guidance” on interest rates — currently at 0.5 percent — to avoid “unwarranted ... expectations.”
The 48-year-old former governor of the Bank of Canada stressed to reporters that if unemployment falls to 7 percent from the current 7.8 percent — which is not expected to happen until 2016 — it would not automatically trigger an increase in interest rates but would be a “way station” to reassess bank policy.
By giving an indication that interest rates could stay low — possibly for several years — businesses and families will get a clearer picture of what it would cost to borrow and therefore would be encouraged to take out loans, which in turn would help stimulate the economy.
The Bank of England joins the United States Federal Reserve and the European Central Bank in providing guidance on interest rates.
Carney also said the bank would not scale back its 375-billion-pound (US$579.45 billion) bond-buying program while unemployment remains about 7 percent.
Carney took office on July 1, becoming the first non-Briton to run the bank in its 319-year history.
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