Bank of England governor Mark Carney has indicated an interest rate rise is not on the horizon despite unemployment hovering around the 7 per cent threshold at which the monetary policy committee may consider hiking rates.
Speaking to the BBC’s Newsnight programme, Carney said the MPC looks at “overall conditions in the whole labour market”, rather than just focusing on one indicator.
He added that the UK economy was “in a different place” to when he introduced the policy of forward guidance in August.
He said: “We don’t see an immediate need to change monetary policy.”
Earlier this week Government figures showed unemployment fell a massive 0.5 per cent from September to November last year to hit 7.1 per cent, coming within touching distance of the Bank’s threshold for considering an increase.
As a result of the steep decline in the number of people unemployed, some have suggested Carney could be about to lower the threshold to 6.5 per cent.
Asked whether this was possible, he said: “There are a broad range of things we could do, I wouldn’t jump to that conclusion… [what] we’re trying to get across is that it’s all about the overall conditions in the labour market.
“We wouldn’t want to detract from that focus by unnecessarily focusing on one indicator.”
In August, Carney introduced forward guidance, which stated that the MPC would consider raising interest rates only when unemployment fell below 7 per cent or there was an unexpected spike in inflation.
Legal & General Mortgage Club director Jeremy Duncombe says: “Smart borrowers should still be aware that lenders are likely to price in base rate rises well in advance of any increases. The historically low rates currently available on the market have an expiry date. Borrowers should look at their options to tie into favourable deals while they still can.”