BoE's Mark Carney: 'Tremendous Sympathy' for Savers but Holding Interest Rates Down Essential for UK Recovery

Bank of England Governor Mark Carney said keeping the key rate at its record-low until unemployment falls would lift the country's economy by more than 0.5%. However, he warned that this claim should be taken "with a grain of salt".

Speaking on BBC Radio 4's Today programme, Carney said loose monetary policy is necessary to the UK's economic recovery, in which it is in the very early stages, even if savers must continue to suffer low interest rates.

"We have tremendous sympathy for savers, but the best way to get interest rates back to a normal level is a strong economy," Carney said.

Carney unveiled his forward guidance on the path of monetary policy at the launch of the BoE's quarterly Inflation Report. He said the base rate would be held at 0.5% until the UK unemployment rate falls below 7%, when a hike would be considered.

He also said the BoE would keep the option open of further stimulus through its £375bn quantitative easing programme of asset purchases until unemployment fell to the 7% threshold.

However, the guidance is subject to "knockouts" which would void any rate hike, including the threat to financial stability and inflation concerns.

In the BoE's Inflation Report, UK growth is forecast to reach pre-crisis levels by the end of 2014, supported by loose monetary policy.

Britain's economy appears to be embarking on a steady recovery. Growth accelerated to 0.6% in the second quarter, up from 0.3% in the opening three months.

Private industry data from the beginning of the third quarter suggests that the momentum has gathered pace again, with service sector activity hitting a six-and-a-half year high.

Carney also praised his predecessor Mervyn King during the interview.

"Governor King and his colleagues made tremendous progress on improving the balance sheets of the banks. We need to finish the job," he said.

"The cultural issue is fundamentally important. There has to be a change in the culture of these institutions."

'Striking' no women on MPC

Carney, who has already pleased many feminists by putting Jane Austen on the ten pound note, also said on the radio that it was "striking" and "anomalous" that there is not one female member of the BoE's Monetary Policy Committee (MPC).

He said it is important to "grow top female economists all the way through the ranks".

The Chancellor of the Exchequer, not the BoE governor, holds responsibility for appointing MPC members.