The UK Unemployment rate for December compiled by the International Labour Organisation (ILO) declined to 7.1%, lower than the median estimate of economists of 7.3% and Novembers 7.4%. This is the biggest fall since 1997, the number of out of work dropped by 137,000. The data released by the Office for National Statistics showed that the unemployment rate had dropped to near the Bank of England’s forward guidance threshold of 7%. The BoE had previously highlighted the unemployment rate being a signal for an increase in interest rates from the current record low of 0.50%, however the bank has now said that it would be sometime, and a gradual increase. Following the inflation rate in the UK falling to the BoE target of 2%, there isn't the inflationary pressure to raise rates, however the improoving labour market is likely to be the caveat for a rate rise.
Unemployment now down to 7.1 %. Good news. But BoE forward guidance about to be tested: pic.twitter.com/bimyJINTTL— Faisal Islam (@faisalislam) January 22, 2014
The full ONS Labour Market Statistics for January.
Bank of England Minutes
The Bank of England minutes for their meeting on the 8th & 9th of January were released at the same time as the ILO Unemployment rate, the MPC voted unanimously (9-0) to leave interest rates and asset purchases unchanged.
- Bank rate held at 0.5%
- Asset purchases left unchanged at £375bn
In the FX markets Sterling rallied against the majors, following the better than expected unemployment rate. Cable was bid, trading to session highs against the greenback.