MPC members back Carney on forward guidance

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Most members of the Bank of England's Monetary Policy Committee (MPC) backed their new governor's policy of forward guidance on interest rates, minutes from the Committee's latest meeting show.

Eight out of the nine members voted in favour of forward guidance, in which the governor indicates to the market how long he intends to hold the base rate at a record low. Carney announced last week he will not move to raise rates until the unemployment rate falls back below the 7% mark.

The minutes of the meeting held on 31 July and 1 August also show the Committee voted unanimously to leave the Bank's quantitative easing programme unchanged at £375bn.

However, the MPC said it "stands ready to undertake further asset purchases while the LFS unemployment rate remains above 7% if it judges additional monetary stimulus is warranted".

The minutes said most members wanted to first gauge the impact of the guidance on asset prices before considering the case for another round of stimulus.

The dissenter on forward guidance was Martin Weale, who voted for a time horizon for the first inflation knockout that was shorter than proposed.

The yield on the 10-year gilt hit a two-year high this morning at more than 2.6% ahead of the announcement.

Meanwhile job market data from the Office for National Statistics revealed the unemployment rate in the second quarter of the year is at 7.8%, unchanged from the previous quarter, but down 0.2 percentage points from a year earlier.

The total number of unemployed people in Q2 was 2.51 million, down 4,000 from January to March and down 49,000 from a year earlier.

Meanwhile, the employment rate form those ages between 16 and 64 was 71.5%, up 0.1 percentage points from January to March.

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