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Unemployment rate falls to 7.4pc

Sam Cordon

December 18, 2013

This brought the number of unemployed people down by 99,000 to 2.39 million.

The drop in unemployment will spark speculation that the Bank of England will raise the base rate from its historic low of 0.5% after Governor Mark Carney linked the two together in his forward guidance announcement in August.

But in November Carney spoke out against speculation of an earlier than expected rate hike by stressing the unemployment rate was a threshold and not a trigger to change interest rate policy.

Capital Economics said that the latest minutes of December’s MPC meeting provide more evidence that the Committee is unlikely to raise interest rates as soon as the unemployment rate reaches 7%.

In particular, the minutes noted that the recent strengthening of the pound meant that inflation was probably on course to dip below the 2% target in the second half of 2014. So even if the economic recovery continues to bring the unemployment rate down rapidly, the benign inflation outlook will enable the MPC to keep interest rates on hold for a long time yet.


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