Sound bites: unemployment shows Bank of England in for the duration on 0.5% rates

Judging by the slow rate of attrition in UK unemployment coming down, it looks like the Bank of England will be in for the duration on record low interest rates. Waiting for headline unemployment to come down from 7.8% to the key 7.0% policy threshold will be like watching wet paint drying. Conditionally, it is going to take a long time. The only potential circuit breaker that might engage quicker tightening from the Bank is the budding UK housing bubble. It seems as if a lot of the BOE’s monetary largesse is now being funnelled into the UK housing market. While this might be a good thing for rebuilding consumer confidence, the Bank will not want to see this unfold at the expense of its inflation targets. Headline UK inflation has only been allowed to live above its 2% target for so long out of consideration for the recession. That might change quite quickly if the UK housing market begins to show signs of heating up too quickly. It could spell the risk of the BOE bringing forward its expected rate tightening from 2015, earlier into 2014. This should continue to provide continuing support for sterling and intensify steepening pressure in the UK gilt yield curve