"The upward move in market expectations of where bank rate will head in future could, at the margin, feed into the effective financial conditions facing the real economy"
- Mark Carney, Bank of England Governor
During the speech in Nottingham at an event hosted by the UK's leading industry and business associations, the Bank of England Governor Mark Carney reassured market participants that borrowing costs will not be increased any time soon. He also claimed the BoE's readiness to increase its stimulus programme in case investors' expectations for higher interest rates will rise too far and undermine the ongoing recovery. Carney once again repeated that the 7% unemployment level is considered as a threshold for the forward guidance on the future path of benchmark interest rate. However, the Bank of England expects the jobless rate to hit the 7% level no sooner than in late 2016, supporting the case the key rate should remain at record-low of 0.5% until that time.
Secondly, Carney confirmed that inflation pressure still remains the omnipresent remit of the nation's central bank, and assured that policymakers will not hesitate to raise interest rates when required. Unlike in Canada or the U.S., where the pace of growth in consumer prices has been floating well below the target levels, the U.K. has been struggling with abnormally high inflation rates since December 2009, climbing to 5.2% in September 2011. Currently, the BoE expects inflation to remain subdued, while the newly-adopted framework includes the so-called "knockouts", which are linked to BoE's 2% inflation target.
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