Drop in UK Unemployment Forces BoE to Expect Higher Rates in 2015

The Bank of England expects to consider raising interest rates in 2015, a year earlier than expected, following a sharp fall in unemployment.

But the Bank tempered expectations of an early increase with the warning that the recovery remained fragile and rates could still remain low for several years.

The Bank governor, Mark Carney, said he expected growth to remain modest over the next couple of years while the economy continues to be hampered by a weak banking sector and stumbling overseas markets.

Speaking after publication of the central bank’s quarterly inflation report, Carney played down concerns that the current 0.5% base rate would go up before real incomes began to rise and the recovery was secured.

“The economy is growing robustly as lifting uncertainty and thawing credit conditions start to unlock pent-up demand. But significant headwinds – both at home and abroad – remain, and there is a long way to go before the aftermath of the financial crisis has cleared and economic conditions normalise,” he said in the report.

“That underpins the monetary policy committee’s (MPC) intention to maintain the exceptionally stimulative stance of monetary policy until there has been a substantial reduction in the degree of economic slack.”

via theguardian.com

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