With the Bank’s monetary policy committee seemingly sticking to the forward guidance policy laid out by new governor Mark Carney in August, there looks to be little scope for upset in the near future. Bank rate has not risen in the UK since mid-2007.
“UK monetary policy settings for now are on auto-pilot, barring the US debt ceiling debate getting very messy,” said David Tinsley, chief UK economist at BNP Paribas commented. Simon Hayes of Barclays agreed: “The stage seems set for a protracted period of monetary inaction.”
Under Carney’s forward guidance unless inflation expectations become unanchored, or the financial policy committee says that low rates are risking stability, a rate hike will not be considered until unemployment drops below seven per cent. Currently, the jobless rate is 7.7 per cent.