BoE sends ‘clear signal’ interest rates will be held

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Bank of England deputy governor Charlie Bean says officials are sending a “clear signal” they will not raise interest rates in the near future.

In an interview with Bloomberg at the Jackson Hole Economic Policy Symposium, Bean said the bank was “communicating not just to market participants, but to people, to households and businesses, to give them a clear signal that interest rates are not likely to rise imminently,”

Earlier this month, BoE governor Mark Carney said the bank would keep the base rate at 0.5 per cent until the UK’s unemployment rate falls below 7 per cent unless inflation spikes.

The Bank is also prepared to add to QE while the unemployment rate remains above its desired level.

Speaking to Bloomberg, Bean said: “What we are trying to do is explain as clearly as we can, what are the factors that will guide policy going forward, recognizing the world is an uncertain place.

“The question of whether what is in the market is warranted or not depends very much on your view of how much scope there is for expansion before inflationary pressures start manifesting themselves.”

According to the Office for National Statistics, the UK’s unemployment rate currently stands at 7.8 per cent.

The Bank of England expects median unemployment to stand at 7.3 per cent over the next three years, the Inflation Report shows, meaning the base rate is likely to remain at its historic low throughout the forecast period.