"Rephrasing and redesigning guidance is going to be pretty challenging because the jobless threshold was a compromise across all of the committee. It will be much harder for them to compromise or agree on the right diagnosis for the U.K. economy in this environment."
- Neville Hill, an economist at Credit Suisse Group AG
While the Pound approached a two-week high versus the shared currency amid the upcoming jobs report, Mark Carney's quest to understand the strength of the nation's economy takes on greater urgency. The unemployment rate is expected to reach 7.3% in the three months through November, inching closer to the 7% threshold, at which the central bank promised to review borrowing costs. According to the Bloomberg survey, eleven economists believe the jobless rate will fell to 7.2%, while only one expects an increase to 7.5%. Despite obvious improvements in the labour market, output per worker remains almost 16% lower compared with the level seen before the recession. Earlier this month, the E&Y Item Club pointed out the central bank should consider modifying guidance, adding a link to real wages. It seems that the whole debate about the productivity of the labour market has become very conflated with what is happening in a shorter-term. The MPC has linked their actions with the unemployment rate, however, judging by only one indicator, their forecasts will be made in a very uncertain space and cannot fully reflect what is happening with domestic economy.
David Miles, MPC's external member, said that unwinding the stimulus programme will not trigger market turmoil or derail economic recovery.
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