Newspaper article The Evening Standard (London, England)

Recovery Has Taken Hold, Says Bank Boss Carney; We're Not Even Thinking of Rate Rise, Says Carney

Newspaper article The Evening Standard (London, England)

Recovery Has Taken Hold, Says Bank Boss Carney; We're Not Even Thinking of Rate Rise, Says Carney

Article excerpt

Byline: Jonathan Prynn, Joe Murphy and Russell Lynch

BRITAIN'S accelerating growth will motor to 2.8 per cent next year -- the best since 2007, the Bank of England predicted today.

Governor Mark Carney said: "For the first time in a long time you don't have to be an optimist to see the glass is half full. The recovery has finally taken hold."

The Bank upgraded its estimate for GDP growth this year from 1.4 per cent to 1.6 per cent and for next year from 2.5 to 2.8 per cent.

A week of sparkling economic data has caught the City by surprise. Yesterday's better-than-expected drop in the inflation rate, to 2.2 per cent, was followed today by a 48,000 fall in unemployment to 2.47 million, or 7.6 per cent of the working population. David Cameron tweeted: "There are now 1.1 million more people in work since the election -- more proof our long-term plan for Britain is working."

But the pace of the recovery has also made it far more likely that interest rates will go up soon, perhaps as early as next year. The Bank's previous forecast, in August, had suggested the cost of borrowing would not rise before autumn 2016. It now estimates there is a two in five chance of unemployment dropping to seven per cent -- the threshold at which it will consider raising interest rates -- next year, rising to a three in five chance in 2015.

But the Governor said: "We're providing the confidence to businesses and households that we will not even begin to think about moving interest rates until that threshold is achieved. And when it is achieved will be a question of how much momentum the economy has, and its ability to withstand an adjustment in monetary policy."

Howard Archer, of IHS Global Insight, said: "Unemployment is currently coming down pretty rapidly ... The drop can only fuel market expectations it will get down to seven per cent by early 2015 and that the Bank of England could very well start raising interest rates then."

A record 29. …

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