The recent boom in the housing market has stirred much speculation around potential interest rate rises. The Bank of England has signalled it will keep interest rates at the historic low of 0.5% for at least another year, despite forecasting strong growth of 3.4% in 2014.
Britain’s recovery is “as yet is neither balanced or sustainable,” said Bank governor Mark Carney, as he delivered its quarterly inflation report on Wednesday. “Activity is still below its pre-crisis level and the household saving rate is likely to fall further,” he said.
More importantly, the BoE provides further guidance on the setting of monetary policy once the unemployment threshold has been reached ‘Even when the economy has returned to normal levels of capacity and inflation is close to the target, the appropriate level of Bank Rate is likely to be materially below the 5% level set on average by the Committee prior to the financial crisis.