Bank of England Governor Mark Carney will be forced to defend his flagship policy of ‘forward guidance’ this week as markets bet on a faster fall in unemployment than the central bank predicts.
The Canadian has said rate-setters will not consider raising interest rates from their current record low of 0.5 per cent until unemployment falls to 7 per cent, which the Bank does not expect to happen until 2016.
But upbeat economic data has prompted money markets to price in a first rate hike in March 2015.
Economists expect Dr Carney to stand by the policy a speech in Nottingham on Wednesday. Deutsche Bank chief economist George Buckley said: “He is likely to echo the same sort of language that the BoE used in July when it said rises in money market rates were ‘unwarranted’.”