UK unemployment tumbles but Bank of England in no rush to raise interest rates

UK unemployment tumbles but Bank of England in no rush to raise interest rates
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The unemployment rate in Britain continues to plunge, a further sign of the UK economy’s rapid turnaround.

It fell to 7.1 percent of the workforce in the three months to November.

That is the lowest in nearly five years – down from a previous level of 7.4 percent.

The number of people in work grew by a record amount – 280,000 in the three months to November.

The Bank of England has made unemployment central to its monetary policy, with Governor Mark Carney saying interest rates could go up if the jobless total falls below 7.0 percent, but policymakers on the Monetary Policy Committee have stressed they would not be hurried into raising the cost of borrowing.

“Members therefore saw no immediate need to raise Bank Rate even if the 7.0 percent unemployment threshold were to be reached in the near future,” they said in minutes of their January policy meeting, released at the same time as the jobs data.

However investors bet that the UK central bank will raise interest rates sooner than it has been signalling and the pound hit a one-year high against the euro.

The main benchmark rate is currently at an all-time low of 0.5 percent.

The minutes also made clear that when an interest rate rise does eventually come, fragile prospects for growth and low inflation means moves will be gradual.

The BoE is expected to use the publication of its Quarterly Inflation Report next month to give an update on its guidance, possibly by lowering the threshold unemployment rate below 7.0 percent or by underscoring how the threshold is not a trigger.

Wage pressures remained low. Average weekly earnings rose by 0.9 percent on the year, half the rate of inflation, the Office for National Statistics said.

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