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UPDATE 1-UK unemployment falls sharply, BoE says no rush on rates

William Schomberg and David Milliken
Wednesday, 22 Jan 2014 | 5:23 AM ET

LONDON, Jan 22 (Reuters) - British unemployment plunged to within a whisker of the Bank of England's level for considering an increase in interest rates, data showed on Wednesday, but the central bank stressed it would be in no rush to act.

The unemployment rate dropped to 7.1 percent in the three months to November, a decimal point above 7 percent which the BoE has said is its threshold for thinking about raising interest rates from their current all-time low of 0.5 percent.

The rate of 7.1 percent was below any forecast by economists in a Reuters poll and the lowest in nearly five years. It was down from a previous level of 7.4 percent.

The number of people in work grew by a record amount, a further sign of the economy's rapid turnaround.

Sterling jumped and British government bond prices tumbled as investors bet that the Bank of England will have to raise interest rates sooner than it has been signalling.

But BoE policymakers stressed they would not be hurried. Their case has been helped by a fall in inflation to the Bank's target for the first time in more than four years.

"Members therefore saw no immediate need to raise Bank Rate even if the 7 percent unemployment threshold were to be reached in the near future," they said in minutes of their January policy meeting, released at the same time as the jobs data.

They added: "Shifts in the composition of unemployment ... suggested that equilibrium unemployment might be lower than previously thought."