No immediate rate rise needed, says Carney

Frances colour

In an interview for BBC’s Newsnight Mark Carney, Governor of the Bank of England, said the case for a rate rise would be examined in next month’s inflation report; but that it was important to look at the whole labour market, not just one indicator.

Earlier this week the jobless rate fell to 7.1%; close to the 7% at which Mr Carney said he would consider a rise.

He went on to say the change, when it comes, would be very gradual.

Mr Carney was asked whether it was a problem that the unemployment rate had come down much faster than the Bank of England had been expecting.

The Bank was not expecting the rate to fall to 7% for another two years.

“If our forecast is going to be wrong it’s better to be wrong in that direction,” he said.

He further clarified that the 7% figure was one that he had used to capture the idea that unemployment was going to have to fall considerably before he would “even begin to think about” raising rates.

He played down the importance of the IMF’s increased growth forecast, pointing out that “it’s coming off a low base” and the economy had still not recovered to its 2008 levels.

“The worst of the crisis is behind us but the financial system is not functioning as well as it could,” he said. “Uncertainty among households and businesses is still preventing investment.”