GO
Loading...

Bank of England rate rise is "still some way off" - Fisher

Thursday, 23 Jan 2014 | 4:00 AM ET

LONDON, Jan 23 (Reuters) - The Bank of England is not close to raising interest rates despite the sharp fall in unemployment towards the central bank's 7 percent threshold, policymaker Paul Fisher said on Thursday.

Britain's unemployment rate slid to 7.1 percent in the three months to November from 7.4 percent the month before, data showed on Wednesday - just a fraction above the 7 percent threshold the BoE set in August for considering a rate rise.

Earlier in January, BoE officials agreed that it would not be right to raise interest rates if unemployment hit 7 percent soon, and in a speech to pension fund managers in London, Fisher emphasised this point in the light of the latest data.

"My own judgement is that we are still some way off the point where it is appropriate to start raising Bank Rate and that when it is time, it would be appropriate to do so only gradually," said Fisher, the BoE's executive director for markets.

The central bank would consider offering further forward guidance when unemployment reached 7 percent, he added.

BoE policymaker Ian McCafferty gave a similar message in a speech in Nottingham late on Wednesday.

Fisher said the BoE needed to avoid choking off economic recovery by raising interest rates too quickly, and that the recent return of inflation to its 2 percent target, and lower price pressures, gave it scope to wait before raising rates.

Although recent economic growth has been strong and unemployment had dropped "unusually precipitously", Fisher said the outlook for growth was less certain.

"We are very conscious that the headwinds have not gone away. Much of Europe and some other parts of the world continue to struggle for sustained growth, fiscal consolidation ... is likely to continue for a while to come, and the financial sector still needs some rebuilding," he said.

Weak recent industrial output and construction figures added to concerns, Fisher said.

Fisher also said Britain's productivity remained poor, and that output needed to rise faster than employment - rather than the opposite, which seemed to be happening currently.

"Output simply doesn't appear to be growing fast enough to support the employment growth recorded as well as generate the rapidly rising real incomes one would like to see. Something has to give," he said. (Reporting by David Milliken Editing by Jeremy Gaunt)