Interest rates will not rise from their record low until more than 750,000 new jobs have been created, the Bank of England pledged in a radical step to bolster the economy.
Households and businesses were told not to expect rate rises for at least the next three years as new Bank governor Mark Carney said rates will remain at 0.5 per cent until the unemployment rate drops to seven per cent, depending on stable inflation.
Mr Carney said “a renewed recovery is now under way” in the UK as the Bank hiked its growth forecasts following a flurry of recent upbeat economic figures.
But he insisted the new “forward guidance” strategy of explicitly pinning rate rises to queues at the job centre is vital to help secure Britain’s recovery, which remains the weakest on record.
Mr Carney said higher employment and incomes would “represent real improvements in the lives of people across the nation”.
Around 2.51 million Britons are unemployed, giving a jobless rate of 7.8 per cent.
Cutting this to seven per cent would mean “well over three-quarters of a million new jobs” are created, he said.
In his first public address since taking on the top job last month, Mr Carney said: “A renewed recovery is under way in the United Kingdom and appears to be broadening.”