• Unanimous decision to keep interest rates and QE unchanged
• A fall in the unemployment rate to the 7% threshold will not automatically trigger an interest rate increase
Commenting on the MPC minutes published today by the Bank of England, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:
“Businesses will be pleased with the unanimous decision to keep rates on hold, as well as the reiteration that reaching the 7% unemployment threshold will not automatically trigger a rate increase. UK firms need a prolonged period of stability with low interest rates and low inflation, as this will give them confidence to invest. However the MPC’s forecast for unemployment is optimistic, and while we expect growth to strengthen over the next few years, it is unlikely to be as rapid as the MPC expects.
“We question the Committee’s view of there being a 40% chance that the 7% unemployment threshold will be reached at the end of next year. More weight should be given to a likely fall in inactivity as more people return to the workforce, as this would slow the fall in unemployment.”