Rates may rise sooner as jobless figures fall

Minutes of the latest meeting of the Bank’s Monetary Policy Committee (MPC) said joblessness in the second half of the year looked set to be lower than was thought at the time it published its forward guidance policy on rates.

New governor Mark Carney announced in August that they would not be increased from their historic low of 0.5 per cent until after unemployment had fallen to seven per cent, and the Bank indicated this was not likely to happen until 2016.

But most economists are convinced that this will happen much more quickly and now the Bank has hinted that it is starting to come around to their point of view.

Latest jobs figures showed the unemployment rate at 7.7 per cent and a fall in the number of those claiming jobseeker’s allowance, together with surveys of employers’ intentions, suggested it would drop over the rest of the year.

This fall was likely to be “at a faster pace than anticipated at the time of the August inflation report” – the time when the Bank unveiled the forward guidance policy, the minutes said.

The remarks are taken from the MPC meeting earlier this month when policymakers agreed unanimously to leave rates at 0.5 per cent and maintain the quantitative easing (QE) programme, effectively pumping billions into the economy.

None of the nine-member committee wanted to tighten policy –cutting QE or raising rates – while improvements in the economy meant all agreed there was little case for increasing monetary stimulus further.

They also showed that the Bank’s experts believe growth in the second half of the year would be 0.7 per cent a quarter “or a little higher”, stronger than had been expected in August amid a “robust recovery in activity” in the UK.F