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Bank of England holds fire on rates

Thursday, December 05 17:14:00

The Bank of England held interest rates at a record low once more today in spite of mounting cheer over the UK recovery.

A flurry of encouraging signs on the UK economy has fuelled expectations for growth to pick up to around 1pc this quarter.

But Governor Mark Carney has already sought to allay fears that the better prospects could mean interest rates rising from their current level of 0.5pc sooner than expected.

The low-interest rate policy is part of the bank's monetary stimulus in helping to nurse the UK back to health after the downturn, and also includes a quantitative easing programme (QE) injecting 375 billion sterling into the economy.

The QE drive has now been kept on hold since it was last raised in July last year as the recovery has gained traction.

Policymakers have pledged not to raise rates from the current historic low of 0.5pc until the jobless rate falls to 7pc, although with the jobs market improving there had been concerns that they could go up sooner than previously believed.

Mr Carney admits that the Bank's Monetary Policy Committee (MPC) expects the 7pc threshold to be reached earlier than it did in August.

But he stressed recently to markets that the "forward guidance" linking interest rates to joblessness did not mean that reaching the threshold would automatically trigger a rate rise.