UK economy 'long way' from normality, says BoE's Fisher

Paul Fisher Paul Fisher sits on the Bank of England's rate-setting committee

The economy is "a long way" from normality, the Bank of England's Paul Fisher has warned, a day after the Bank raised its economic growth forecast.

Speaking on Radio 5 live's Wake Up To Money, the Bank's director of markets also said the timing of an interest rates rise was "extremely uncertain".

On Wednesday, the Bank raised its growth forecast for this year from 1.4% to 1.6%, and 2014 from 2.5% to 2.8%.

It also said the unemployment rate could fall to 7% as early as next year.

Governor Mark Carney has previously said the Bank will not consider raising interest rates until the jobless rate falls to 7% or below.

But Mr Fisher pointed out that the Bank's forecasts saw only a 40% chance that 7% unemployment would be reached in 2014, and said the figure should be seen as a "threshold, not a trigger" for an interest rate rise.

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McKinsey believes that households have been significant losers from cheap money”

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"The timing of a rate rise is extremely uncertain," he said. "Our main message is output is growing fast again and looks to be sustained, we've got inflation down close to target and unemployment is falling. But we've a long way to go until the economy gets back to normality.

A fall to 7% unemployment would allow the Bank to "take stock", he said, and see whether an interest rate increase "is appropriate at that time".

"It doesn't mean to say we will automatically raise rates then," Mr Fisher added. "We won't raise rates until we think it's sustainable."

The Bank of England's Monetary Policy Committee, on which Mr Fisher sits, has kept rates held at historic lows of 0.5% since 2009.

He said rates could be expected to eventually rise back to "normal levels" of 4-5%.

On Wednesday Mr Carney struck a positive tone on the UK's economic prospects, saying the UK recovery had "taken hold".

"For the first time in a long time, you do not have to be an optimist to see the glass is half full," he said.

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