Bank of England responds to fall in unemployment

23 Jan 2014

Following  recent reports that the unemployment rate fell to 7.1% in November, there is  growing speculation that the Bank of England may consider changes to current  rates of interest.

The  Bank’s Monetary Policy Committee (MPC) has previously said it would consider a  base rate rise when unemployment reached 7%.

Ian  McCafferty, a member of the MPC, said, ‘The 7% unemployment level is only a  threshold, not a trigger,’ restating that there is no immediate need and the  fact that inflation has returned to the Bank’s 2% target has eased pressure to  raise rates.

Interest  rates have been at 0.5% since 2009, the lowest level since 1964.

The  Office for National Statistics (ONS) said the number of jobless people fell by  167,000 between September and November, with 2.32 million people still  unemployed. The ONS also reported that the number of people claiming  Jobseeker’s allowance has fallen by 24,000 to 1.25 million.

Changes  may not be on the horizon, however. Speaking for private bank Investec,  economist Philip Shaw said, ‘Overall we gain the impression that the MPC does  not want to raise rates soon and that (perhaps) it will bring its unemployment  threshold down’.

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