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Interest Rates Look Likely to Hold

Written By On 03/01/2014

Twenty eight of Britain's leading economists were asked for their opinions on interest rate changes in connection to unemployment and house prices.

A mixed bag of answers were received, but all but two of them are in agreement that interest rates will remain on hold until at least next year. Four are predicting rates will not increase before 2016.

Bank of England Governor Mark Carney announced his interest rate plans in relation to the unemployment rate falling to seven per cent back in early August. This was a new 'forward guidance' strategy introduced in order to help people plan their future with more amounts of security and confidence.

Mr Carney linked the jobless rate target to the historically low half a per cent rising, but did not anticipate unemployment to decrease quite as quickly as it has since then. Consequently, a large chunk of the UK's population is now keeping a very close eye on unemployment.

Back then it was estimated that would take between three to four years to happen, but the jobless total has since dropped rapidly as it now stands at 7.4 per cent.

With this figure now being scrutinised more closely than ever, the economists were asked when they think the number will be met. Twelve of them believe that we will see unemployment hit seven per cent before this year is out. Fourteen believe it will not happen until at least next year, whereas the remaining two say it will happen the following year in 2016.

Meanwhile the Nationwide Building Society released some results today appertaining to house price inflation. They report property prices have now risen by 8.4 per cent at the end of the year because the month of December showed increases of 1.4 per cent.

The average price of a property in Britain now stands at nearly £176K compared to approximately £161K the same time last year.

There have been concerns that the BOE will need to hike interest rates to prevent a property bubble occurring, however most of the twenty eight experts do not think that is likely.