- POSTED: 18 Dec 2013 20:08
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British unemployment has hit a four-year low, official data showed on Wednesday, but the Bank of England hinted that record-low interest rates would remain on hold for some time.
LONDON: British unemployment has hit a four-year low, official data showed on Wednesday, but the Bank of England hinted that record-low interest rates would remain on hold for some time.
The unemployment rate slid to 7.4 per cent in the three months to October from 7.6 per cent in the quarter ending in September, the Office for National Statistics (ONS) said in a statement. Market expectations had been for no change.
The Bank of England, under governor Mark Carney, has stated that it will not raise borrowing costs from a record-low 0.50 per cent at least until the unemployment rate falls to seven per cent, under a "forward guidance" policy.
The rate now stands at the lowest level since the three months to April 2009 and has therefore sparked speculation that the BoE could raise its key lending rate sooner than anticipated.
However on Wednesday, minutes from the BoE's rate-setting monetary policy committee (MPC) also forecast that annual inflation was set to fall under its 2.0-per-cent target in mid-2014, meaning any rate rise could be delayed.
The Bank of England's main task is to keep annual inflation rate close to this government-set target level.
"While the latest labour market figures have raised the chances that the jobless rate falls below the MPC's 7.0-per-cent threshold in 2014, December's minutes suggested that the benign inflation outlook will enable it to keep rates on hold for a long time yet," said Capital Economics analyst Samuel Tombs.
"Even if the economic recovery continues to bring the unemployment rate down rapidly, we continue to think that the subdued inflation outlook will enable official interest rates to remain on hold for another couple of years."
The minutes revealed that MPC voted unanimously to maintain record-low rates at their December 4-5 gathering.
Policymakers were united also in their decision to maintain the BoE's quantitative easing (QE) stimulus, under which it has pumped out £375 billion (US$605 billion, 447 billion euros) to boost lending and growth since starting the programme in 2009.
In a separate development, the BoE unveiled plans to issue plastic bank notes for the first time in its 300-year history, concluding that they are longer-lasting and harder to counterfeit than ones made from cotton paper.
The central bank will in 2016 issue a new £5 polymer bank note featuring a picture of former prime minister Winston Churchill. A year later, the bank will issue a £10 plastic note that will feature 19th century British novelist Jane Austen.