Bank of England in no rush to cut rates
Bank of England Governor Mark Carney said there's plenty of spare capacity in the UK labour market as he repeated that officials won't rush to raise interest rates even if the jobless rate reaches their 7pc threshold.
"There's a lot of slack," Mr Carney told Parliament's Treasury Committee in London. "The good news is, because we're having the recovery, that slack starts to be taken up," though "7pc is a threshold and not a trigger for an interest-rate increase", he said.
The Monetary Policy Committee (MPC) agreed this month that record-low borrowing costs may be needed even after unemployment falls to the threshold set under forward guidance.
Mr Carney said there was no confusion among businesses he had spoken with about forward guidance, and they did not expect an immediate tightening of policy. Guidance was "giving businesses, households, financial market participants, parliamentarians, perspective on conditions necessary in an economy before the MPC would start tightening monetary policy", he said.
"We don't see this confusion. We are seeing strong growth. We are not seeing an adjustment in short-term expectations of interest-rate moves."
Under its forward guidance policy, the MPC has said it won't consider raising its key rate from 0.5pc at least until joblessness hits 7pc from its current level of 7.6pc. (Bloomberg)