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Interest Rates Holding

Written By On 24/01/2014

Mark Carney wants people to remain calm as he stated yesterday evening that there is 'no immediate need' to raise the interest rate from it's current 0.5 per cent. He made this comment in light of this week's 7.1 per cent official unemployment figure that had been released.

The governor of the Bank of England indicated five months ago that the BOE will look to increase rates when the jobless total hits 7 per cent. But he made it quite clear that this would not necessarily be the trigger as the Bank will take into consideration the 'overall conditions in the labour market' before doing anything.

When Mr Carney was asked by the BBC on Newsnight about his ' forward guidance' policy, he answered that the British economic situation is currently 'in a different place' to when he first gave those guidelines.

The BOE governor also indicated that even when interest rates did start to increase, they would increase slowly.

Meanwhile the GBP has been rising against most currencies as unemployment has fallen so sharply. This has been seen as the factor that would ignite an interest rate hike after Mr Carney publicly announced the unemployment 7 per cent rate as the indicator.

When he gave his 'forward guidance' speech back then, he was not expecting the adult UK jobless total to hit that target before the summer of next year at the earliest.

If that had been the case it was anticipated that rates would begin to rise within a few months of that. Therefore it seems logical to assume the possibility of this happening earlier than originally presumed.

Mr Carney said

The worst of the crisis is behind us but the financial system is not functioning as well as it could. Uncertainty among households and businesses is still preventing investment. There are a broad range of things we could do, but we don't see an immediate need to change monetary policy.