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London - British unemployment plunged to within a whisker of the Bank of England's level for considering an increase in interest rates, data showed on Wednesday, but the central bank stressed it would be in no rush to act.
The unemployment rate dropped to 7.1% in the three months to November, a decimal point above 7% which the BoE has said is its threshold for thinking about raising interest rates from their current all-time low of 0.5%.
The rate of 7.1% was below any forecast by economists in a Reuters poll and the lowest in nearly five years. It was down from a previous level of 7.4%.
The number of people in work grew by a record amount, a further sign of the economy's rapid turnaround.
Sterling jumped and British government bond prices tumbled as investors bet that the Bank of England will have to raise interest rates sooner than it has been signalling.
But BoE policymakers stressed they would not be hurried. Their case has been helped by a fall in inflation to the Bank's target for the first time in more than four years.
"Members therefore saw no immediate need to raise Bank Rate even if the 7% unemployment threshold were to be reached in the near future," they said in minutes of their January policy meeting, released at the same time as the jobs data.
They added: "Shifts in the composition of unemployment ... suggested that equilibrium unemployment might be lower than previously thought."
The minutes also made clear that when an interest rate rise does eventually come, fragile prospects for growth and contained inflation means nothing will happen sharply.
Threshold
The jobless rate was the lowest level since January-March period of 2009, the Office for National Statistics said on Wednesday.
A Reuters poll of economists had produced a median forecast of 7.3%. Many economists in the poll had expected a fall to 7.2%. None had expected 7.1%.
The ONS said the number of people claiming jobless benefits fell by 24 000 in December, compared with a forecast for a fall of 35 000 in the Reuters poll.
The number is more significant than usual because the BoE put unemployment at the heart of its monetary policy last August when it said it would not think about raising borrowing costs - which have been at the record low since 2009 - until the jobless rate falls to 7%.
Since then, Britain's recovery has picked up more speed than the Bank expected and unemployment has fallen fast. The International Monetary Fund on Tuesday sharply raised its forecasts for British economic growth this year.
To quell speculation that the BoE might be hurried into raising interest rates, Governor Mark Carney has repeatedly stressed that unemployment falling to 7% would not be an automatic trigger for a rate hike.
Despite its rapid recovery, the British economy remains 2% smaller than before the financial crisis.
In November, the BoE forecast unemployment could hit the 7% level as soon as this time next year, if interest rates stay unchanged, though its preferred scenario - which factors in the market expectations on rate rises - pointed to late 2015.
BoE policymakers, in the minutes of their January meeting, said they now expected unemployment to hit 7% "materially earlier than previously expected".
The ONS said on Wednesday the number of people in work rose by 280 000 in the three months to November, an all-time record.
The BoE is expected to use the publication of its Quarterly Inflation Report next month to give an update on its guidance plan, possibly by lowering the threshold unemployment rate below 7% or by underscoring how the threshold is not a trigger.
Some economists have suggested the Bank might set earnings growth as a way of gauging when the recovery is strong enough to withstand an increase in interest rates.
