With the unemployment rate likely to fall below 7% soon, February’s MPC meeting will set the scene for the demise of forward guidance, at least in its current form. Comments by MPC members suggest that the next ‘phase’ of guidance will not involve reducing the unemployment threshold but instead focus policy on a broader range of labour market indicators. But we will probably have to wait until February’s Inflation Report to learn the details. Meanwhile, with inflation heading down, interest rates should stay on hold at this week’s meeting and for some time yet.
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