BoE's Carney says 'no need' for immediate interest rate rise

BoE's Carney says 'no need' for immediate interest rate rise

Bank of England Governor Mark Carney has pledged not to increase interest rates yet, despite unemployment rates dropping closer to the 7% threshold he set. 

In November, the Bank brought forward its forecast for 7% unemployment to 2015, but the latest figures suggest the threshold will be hit much sooner.

He said in a television interview at the World Economic Forum in Davos that any change, when it comes, would be 'very gradual', and that the economy was in a 'different place' to when he introduce the forward guidance.

He added:

"We don't see an immediate need to change monetary policy."

"There are a broad range of things we could do, I wouldn't jump to that conclusion...we're trying to get across is that it's all about overall conditions in the labour market. We wouldn;t want to detract from that focus by unnecessarily focusing on one indicator."

Jeremy Duncombe, Director, Legal & General Mortgage Club, commented:

"The idea of linking interest rates to unemployment stats has always had its critics.  Initially for the morgage market, a concern was that forward guidance might signal the death of fixed rate mortgages, but we've continued to see fixed rates being preferred by borrowers who realise that rates would still rise in the medium term."

"Smart borrowers should still be aware that lenders are likely to price in base rate rises well in advance of any increases.  The historically low rates currently available on the market have an expiry date.  Borrowers should look at their options to tie into favourable deals while they still can."