Interest rates to be held until unemployment falls

<p>UK interest rates will not rise until unemployment has dropped.</p>

The Bank of England has provided forward guidance on the future of interest rates, indicating that they will be held at a record low of 0.5 per cent until unemployment is under control.

It was announced yesterday (August 7th) by the Bank that this plan will be stuck to as long as it does not entail material risks to either price stability or financial stability.

Until unemployment is down to the seven per cent mark, the Bank is not going to consider increasing interest rates in the UK. The base rate has been at 0.5 per cent since March 2009.

It was noted by the Monetary Policy Committee that it is likely inflation is going to remain between two and three per cent for the next 18 months to two years. The target is for it to be two per cent.

Sterling fell across the board on the announcement of the monetary policy, it was pointed out by Andy Scott, premier account manager at foreign currency exchange brokers HiFX.

He said: "Sterling fell by over 0.5 per cent against both the dollar and the euro before beginning to recover."

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