Almost there! Unemployment hits 7.1%

Loughton_Monkey

HAMISH_MCTAVISH wrote: »

...He said he'd not even consider raising rates until it fell below 7%, and raising rates after that depends on a large number of other variables.

Which the media then misinterpreted completely.

As I have posted before, the actual forward guidance waffle is here:

In particular, the MPC intends not to raise Bank Rate from its current level of 0.5% at least until the Labour Force Survey headline measure of the unemployment rate has fallen to a threshold of 7%, subject to the conditions below. The MPC stands ready to undertake further asset purchases while the unemployment rate remains above 7% if it judges that additional monetary stimulus is warranted. But until the unemployment threshold is reached, and subject to the conditions below, the MPC intends not to reduce the stock of asset purchases financed by the issuance of central bank reserves and, consistent with that, intends to reinvest the cash flows associated with all maturing gilts held in the Asset Purchase Facility.

The guidance linking Bank Rate and asset sales to the unemployment threshold would cease to hold if any of the following three ‘knockouts’ were breached:

• in the MPC’s view, it is more likely than not, that CPI inflation 18 to 24 months ahead will be 0.5 percentage points or more above the 2% target;

• medium-term inflation expectations no longer remain sufficiently well anchored;

• the Financial Policy Committee (FPC) judges that the stance of monetary policy poses a significant threat to financial stability that cannot be contained by the substantial range of mitigating policy actions available to the FPC, the Financial Conduct Authority and the Prudential Regulation Authority in a way consistent with their objectives.

The thing is, though, if unemployment gets to 6.9%, say, in March, with inflation still at 2% or below, then we could get a situation in which every month we are waiting for (and half expecting) the other shoe to drop..... Unless, of course, Carney cares to spout out some extra so-called 'guidance'.

Strangely, the good unemployment and good borrowing figures have done nothing to FTSE which drove itself into negative teritory after the news, even though the results exceeded 'expectations' - that would have been already priced in. Although the £ did strengthen somewhat.

Loughton_Monkey

Kennyboy66 wrote: »

Taxi for Ed Balls

tomterm8

Generali wrote: »

Has Carney said that the base rate would rise once unemployment hit 7%? I've not read that.

For a start it goes to the vote so he doesn't have the power to raise or lower rates unilaterally.

He just said he'd consider raising the rates. While inflation is on target and/or falling, I don't see why he would actually raise them.

Personally, I think they should do something about all that qualitative easing before they start messing around with rates.

michaels

tomterm8 wrote: »

He just said he'd consider raising the rates. While inflation is on target and/or falling, I don't see why he would actually raise them.

Personally, I think they should do something about all that qualitative easing before they start messing around with rates.

Can't see it happening, the debt managemnt office is already having kittens about how it will fund the deficit without the BoE buying the majority, increasing the supply further by unwinding QE? I don't think so.

Agree with you on interest rates, problem comes if the central inflation projection in 2 years is above target and the unemployment threshold has been breeched it becomes much harder to justify not moving rates. I wonder if we will see discussion of the differences between external inlafion (not really within the ppower of the BoE to control) and 'internal inflation'?

Generali

Presumably the unemployment rate will go back up next month as the tidal wave of immigrants from Bulgaria and Romania clamber up the pebbles at Dover.

purch

Generali wrote: »

Presumably the unemployment rate will go back up next month as the tidal wave of immigrants from Bulgaria and Romania clamber up the pebbles at Dover.

That would be typical.

Bloody immigrant using other bloody immigrants to manipulate the figures :eek:

MrRee_2

We will not see any rate rise until after the next election.

And we won't see a 5% base rate again in our lifetimes.

Of that there is no doubt whatsoever.

Graham_Devon

Kennyboy66 wrote: »

Taxi for Ed Balls

Indeed.

Though like investors, I'm not sure Osbourne will be too comfortable with the figures today either. In public, sure, he'll be grinning from ear to ear. But he knows what the investors know....each bit of goodf news means less chance of further stimulus and support.

They will have to work some kind of miricle to keep the good economic news flowing for the next 15 months.

They could have found themselves peaking a bit too early. Afterall, with good news, comes the fears of having to move away from emergency measures. How do we deal with that without upsetting the applecart?

Could be a difficult one for the current government if things carry on as they are. Also difficult for the BOE as again, they appear to have had their fingers burnt. I think forward guidance was meant to last a little longer than 4 months! They expected to hit the issue of 7% unemployment in 2015/16.

HAMISH_MCTAVISH

Graham_Devon wrote: »

each bit of goodf news means less chance of further stimulus and support..

That's exactly the point though.

Stimulus and support are supposed to be temporary in nature. Until the economic recovery becomes strong enough to support itself without them. At which time they can and should be withdrawn.

Funding for lending was withdrawn from mortgages once the lending markets recovered sufficiently.

Interest rates will rise when the economy has recovered sufficiently.

HTB will end when bank mortgage lending recovers sufficiently.

AndyGuil

Inflation at 2% and looking forward there are deflationary pressures. Rates won't be touched.