LONDON: Bank of England policymakers will be in no hurry to raise interest rates even as the economy gathers steam, minutes of their latest policy meeting showed yesterday.
Sterling briefly fell against the dollar and British government bond prices pared losses as the BoE underscored its message that an eventual fall in unemployment to 7 percent would not lead to an automatic tightening of monetary policy.
The minutes also showed policymakers were unfazed by a recent increase in inflation expectations - which officials have previously linked to hikes in power tariffs.
But the Bank did see various risks to what it called Britain’s current “sustained recovery”, the rationale for keeping easy policy.
Governor Mark Carney linked the BoE’s interest rates to a recovery in the labour market in August. Since then unemployment has fallen faster than the BoE expected, touching 7.6 percent in the three months to September.
Last week, when the Bank announced upbeat growth estimates and said unemployment could hit 7 percent as soon as late 2014, Carney stressed that level should not be seen as a trigger for a rate hike. The minutes of the November 6-7 meeting of the Bank’s Monetary Policy Committee suggested the other eight MPC members agreed.
“With the proviso that medium-term inflation expectations remain sufficiently well-anchored, the projections for growth and inflation under constant bank rate underlined that there could be a case for not raising bank rate immediately when the 7 percent unemployment threshold was reached,” the minutes said.
George Buckley, an economist with Deutsche Bank, said the wording was a little more explicit than previous comments from BoE officials that a fall in unemployment to 7 percent would not mean an automatic rate hike.
Jonathan Loynes at Capital Economics said the main message of the minutes was to play down the importance of the unemployment rate threshold. Reuters
