Bank of England chief dampens rate-rise talk

Bank of England chief Mark Carney on Thursday played down speculation that British interest rates were due to rise following a shock fall in unemployment. Speaking in Switzerland ahead of the World Economic Forum in Davos, Carney told BBC's Newsnight that there was "no immediate need to increase interest rates". The possibility of a hike in the bank's key rate rose on Wednesday after unemployment fell to 7.1 percent, just above the 7 percent threshold that Carney set as a potential trigger for a tightening of monetary policy. The dramatic unemployment fall caught the bank offguard, having predicted it would take two years for the rate to reach 7 percent. But the bank chief stressed it was "overall conditions in the labour market" that would affect the institution's decision. He also said any eventual change would be gradual. Britain received a further boost when the International Monetary Fund increased its growth forecast, but Carney dampened talk of a strong recovery, pointing out "it's coming off a low base". "The worst of the crisis is behind us but the financial system is not functioning as well as it could," he told the BBC. "Uncertainty among households and businesses is still preventing investment." The bank voted earlier in the month to hold its key interest rate at a record-low 0.50 percent and maintain the level of stimulus pumping around the economy.