Bank of England Governor Mark Carney has recommitted to an extended period of low interest rates and said he could pump more money into the British economy if financial markets get ahead of themselves and threaten to choke off the recovery.
In his first speech since taking over the UK central bank, Carney said the recovery there is broad-based and looks set to continue but he thinks financial markets are too hopeful about unemployment.
“One possible explanation is that markets think that unemployment will come down to seven percent more quickly than the Bank thinks. And since the aim of our policy is to secure recovery as quickly as possible, that would – of course – be welcome. But policy is not built on hope but on expectation, and we estimate there is only a one in three chance of unemployment coming down that quickly,” Carney told a gathering of local business leaders in Nottingham, in the manufacturing heartlands of England’s Midlands region.
In its ‘forward guidance’ the central bank has said the cost of borrowing will only go up when UK unemployment falls to 7.0 percent of the workforce from the current 7.8 percent.
Carney still thinks that will be in late 2016, rather than the market prediction of mid 2015.
He based that on expectations of further cuts in government jobs and the large numbers of part-time workers who want to work full-time.