LONDON (AFP) ― Britain’s unemployment rate rose in the quarter to December, official data showed on Wednesday, easing pressure on the Bank of England to raise borrowing costs.
The jobless rate climbed to 7.2 percent, up from a near five-year low level of 7.1 percent in the quarter to November, the Office for National Statistics said in a statement.
The Bank of England has faced pressure from financial markets to begin raising its main interest rate from a record low level of 0.5 percent as Britain’s economic recovery picks up speed.
Sterling slid against the dollar on Wednesday following the latest data, falling away from recent three-year highs triggered by expectations of future rate hikes.
|Mark Carney, governor of the Bank of England (Bloomberg)|
Canadian national Mark Carney took charge of the bank last August and launched a forward guidance policy, under which he said the central bank would not raise borrowing costs until the unemployment rate falls to at least 7 percent.
Carney has since tweaked the guidance with official data showing unemployment falling much faster than expected up until Wednesday’s data.
Under the amended guidance set out last week, it will seek to absorb all the spare capacity in the economy as it looks to keep inflation close to a government-set target of 2 percent, before moving to hike its key lending rate.
In a separate release on Wednesday, it revealed that policymakers voted unanimously to maintain its record low rate as well as its stimulus amount earlier this month.
The bank’s monetary policy committee decided that there was still too much spare capacity in the economy, according to minutes from its Feb. 5-6 meeting.
“Despite the (recent) sharp fall in unemployment, the committee judged that there remained scope to absorb spare capacity further before raising bank rate,” read the minutes.
“When bank rate did begin to rise, it expected that the appropriate path, so as to eliminate slack over the next two or three years and keep inflation close to target, would be gradual.”