Mark Carney, the Governor of the Bank of England, has inaugurated a policymaking revolution by announcing that the central bank will aim to bring down Britain’s high levels of joblessness – the first time in its history it will explicitly target a fall in unemployment.
The new Governor announced that the Bank will hold interest rates at their present record low level of 0.5 per cent until the national unemployment rate falls to at least 7 per cent. Under its latest economic forecasts the Bank does not expect this target to be hit until the second half of 2016, implying that the cost of borrowing throughout the economy will remain low for three more years.
Frances O’Grady, general secretary of the TUC, said that the unions had long campaigned for the Bank to take account of unemployment in setting policy.
But others warned that the new policy represented a potentially perilous watering down of the Bank’s long-standing inflation target. “To try to use monetary policy to reduce unemployment when inflation is already above target is playing with fire and could lead us down the road that we followed in the 1970s,” said Philip Booth of the Institute of Economic Affairs think-tank.
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