The Canadian Press - ONLINE EDITION

UK unemployment rate drops to 7.1 per cent, edging closer to target set by Bank of England

  • Print

LONDON - Britain's unemployment rate has dropped sharply to 7.1 per cent, edging closer to the point at which the Bank of England will consider raising interest rates.

The Office of National Statistics said Wednesday the unemployment rate in in the three months ending in November is down 0.5 percentage points in the June to August period. The rate of the drop took economists by surprise — even though many had been suggesting that the economy was improving much faster than the Bank of England had predicted.

Governor Mark Carney has said the bank will reassess its monetary policy when the unemployment rate hits 7 per cent — though he had been at pains to note it was a threshold, not a trigger.

Minutes from the bank's January monetary policy committee meeting suggest that even after that rate is hit, policymakers may refrain from action, saying there was no "immediate need" to raise interest rates. Policymakers suggested the figures may overstate how much conditions have improved.

"Members therefore saw no immediate need to raise Bank Rate even if the 7 per cent unemployment threshold were to be reached in the near future," the minutes said. "Moreover, it was likely that the headwinds to growth associated with the aftermath of the financial crisis would persist for some time yet and that inflationary pressures would remain contained."

Policymakers said that when the time did come to increase the interest rate from its record low of 0.5 per cent, "it would be appropriate to do so only gradually."

The voting was unanimous to keep policies unchanged in January.

The impact on markets was modest, with the pound rising 0.3 per cent against the dollar after the unemployment report. Tighter monetary policy tends to boost the value of a currency.

Chris Williamson, an economist for Markit.com, said the big question becomes how long the bank will feel comfortable keeping rates low.

"With so much uncertainty hanging over the Bank's understanding of the economy, highlighted by the extent to which policymakers have been surprised by the fall in unemployment, many will see that as a somewhat bold commitment to make," he said.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Kevin Cheveldayoff announces Maurice contract extension

View more like this

Photo Store Gallery

  • A pelican comes in for a landing Wednesday afternoon on the Red River at Lockport, Manitoba - Standup photo- June 27, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • Geese fight as a male defends his nesting site at the duck pond at St Vital Park Thursday morning- See Bryksa’s Goose a Day Photo- Day 08- May 10, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos

Poll

Do you agree with the province’s crackdown on flavoured tobacco products?

View Results

View Related Story

Ads by Google