By Ana Nicolaci da Costa
NOTTINGHAM, England Jan 22 Bank of England
policymakers are discussing what they will do when unemployment
falls to their threshold level for considering an increase in
interest rates, a top official at the central bank said on
"I am discussing it internally but I am not going to make
any statements until I have discussed it with my colleagues,"
Ian McCafferty, a member of the BoE's Monetary Policy Committee,
Earlier on Wednesday, data showed Britain's jobless rate
fell to 7.1 percent in the three months to November, just above
the 7 percent level which the Bank has set as its threshold for
considering an increase in its record-low interest rates.
Minutes of the BoE's latest meeting stressed that interest
rates would not rise immediately when the 7 percent level was
reached, given Britain's subdued inflation outlook.
In a speech in the central English city of Nottingham,
McCafferty echoed the tone of the minutes and said that once
unemployment falls to 7 percent "we will then be able to say
more in detail about where we will be going".
McCafferty's comments were the first from a Bank policymaker
after the stronger-than-expected unemployment data on Wednesday,
which raised pressure on the central bank to tweak or further
clarify its "forward guidance" policy as the economy recovers.
"The recovery is still in its early stages, and the
headwinds to growth linked to the financial crisis are likely to
persist for some time yet... When the time does come to reduce
the current degree of stimulus, it would be appropriate to do so
only gradually," McCafferty said in his speech.
He also said the conditions for a rebound in business
investment were falling into place, reiterating the BoE's view
that it is key for the long-term sustainability of Britain's
However, McCafferty said it was normal for business
investment to be lagging the pace of Britain's economic growth,
currently one of the strongest among industrialised nations.
"A broad-based recovery in activity - which must mean a
recovery in household spending, which accounts for 60 percent of
gross domestic product (GDP) - is a prerequisite for a recovery
in business investment, not the other way round," he said.
That might take a little time in coming, McCafferty said,
adding that more rapid investment growth may not show through
until late this year and into 2015.
McCafferty said he suspects official investment data will be
revised up more in line with other surveys, to show Britain is
already in the very early stages of an investment recovery.