Bank of England Governor unveils interest rates pledge

Bank of England governor Mark Carney. Credit: Simon Dawson/PA Wire

The new Bank of England Governor Mark Carney told ITV News he will not consider changing interest rates until unemployment reaches 7%.

Around 750,000 jobs will need to be created before the Governor thinks about altering the 0.5% rate.

Mr Carney made the radical step in a bid to boost the economy and "provide greater certainty to households and businesses".

The current unemployment rate is 7.8% - meaning around 2.51 million Britons are unemployed - and forecasts predict that the figure will not fall below 7% until at least the middle to end of 2016.

Mr Carney told Economics Editor Richard Edgar that the unemployment figure was "a variable that people care about, they can measure and keep track of".

He insisted the strategy of pinning rate rises to queues at the job centre is vital to help secure Britain's recovery, which remains the weakest on record.

The Governor said higher employment and incomes would "represent real improvements in the lives of people across the nation".

Watch the full interview with the new Bank of England Governor

However, the Governor warned that he would not "risk financial stability" and there are a number of caveats - or "knockouts" - that could see the Bank take action before unemployment falls to below 7%.

If policymakers fear inflation will be 2.5% or higher in 18 months' to two years' time, the plan could be scrapped.

Worries over soaring inflation expectations, or regulator concerns that the approach poses a "significant threat to financial stability", could also see the Bank break its pledge.

Chancellor George Osborne welcomed the move, saying families would "have greater certainty" that interest rates will remain at 0.5% for a considerable amount of time.