Financial markets are now pricing in an interest rate hike before the next general election after today’s shock fall in unemployment.
The slide to 6.9% stunned financial markets, pushing the pound to its highest level against the dollar for almost five years, up one cent to $1.6818.
It also sent shock waves through sterling futures markets, as analysts said a first rate rise is now fully priced in by April next year, a month before the UK goes to the polls.
The slide buries the first incarnation of the Bank of England’s forward guidance under which the monetary policy committee would not consider tightening policy until the jobless rate reached 7%.
It comes with wage growth finally outstripping inflation and the UK expected to show the fastest recovery among major economies this year, according to the IMF.
Andy Scott, associate director at currency trader HiFX, said: “If we continue to see the trend… then a rate hike by the Bank of England could even come sooner than this time next year.”
