Interest rates “to go up” when unemployment rate reaches 7%

Interest rates will remain at 0.5 per cent until the employment rate has dropped to seven per cent, Mark Carney, the new Governor of the Bank of England has said.

He also said that the bank will not be reducing its £375bn asset purchase programme until that level is reached. The unemployment rate is currently at 7.8 per cent. Around 750,000 jobs will need to be created in order for the jobless rate to reach seven per cent, something which could take about three years, Carney suggested.

John Longworth, director-general of the British Chambers of Commerce (BCC), said that the governor’s decision to keep interest rates on hold will reassure business.

He suggested a fail in the unemployment rate to seven per cent is unlikely to happen in the next few years, so it looks as though interest rates will remain low for quite sometime.

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