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UK unemployment is falling

UK unemployment is falling

Chart of the Week

by Gabriel Stein in London

Tue 19 Nov 2013

What the chart shows: The chart shows the three-month centred moving average of UK unemployment on the ILO definition.


Why the chart is important: In July of this year, the Bank of England introduced its own version of forward guidance, attempting to reassure and inform markets about the future course of monetary policy. As part of this, Governor Carney said that the Bank would not raise Bank Rate until the rate of unemployment fell to 7% from the then 7.8% range. He – and the Bank – expected this to occur in 2016, meaning that Bank rate would be unchanged for about three years. Already at the time, this was seen as too pessimistic. Four months down the line, this scepticism is confirmed. Although unemployment has only dropped to 7.6%, this is faster than the Bank had expected. Unsurprisingly, the Bank’s latest forecast (November 2013) is for unemployment to reach 7% by Q3 2015. It could well be earlier than that. While 7% unemployment is not necessarily the time at which Bank Rate will rise, the Bank of England is clearly looking to be one of the first major central banks to start normalising interest rates.

Chart and comments provided by Stein Brothers (UK) www.steinbrothers.co.uk

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