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The chief economist of the Bank of England (BOE), the British central bank, on Wednesday said rates would not rise until a "sustained period of growth is reached."
BOE chief economist Spencer Dale added the newly-adopted forward guidance policy of the bank was intended to complement and bolster its long-held inflation-targeting policy.
Forward guidance was adopted by the BOE in August, under the direction of the new governor Mark Carney. Under it, the BOE undertakes not to increase rates from the current, historic 0.5-percent low until unemployment hits 7 percent.
Unemployment is currently 7.7 percent, and the BOE forecasts this target will be met in Q3 2016. However, the target is a milestone and not a trigger and rates do not have to rise if it is met.
"The inflation target, on its own, has proved less well suited to addressing some of the exceptional communications challenges posed by the sustained combination of weak growth and elevated inflation," Dale said in a statement.
He highlighted the need to provide guidance about the BOE's Monetary Policy Committee's (MPC) view of the appropriate trade-off between bringing inflation back to target and stimulating the recovery.
Dale said the events of the past five years had justified the case for using inflation targeting.
"The credibility of the inflation target has played a crucial role in anchoring inflation expectations over that time," said Dale, a period in which inflation has been consistently above its 2 percent target.
"That credibility has been vital in giving the MPC the flexibility to loosen monetary policy aggressively in order to support growth and jobs," he added.
Dale warned markets that despite the use of the 7 percent target, the BOE was committed to its inflation target."The MPC intends to keep interest rates low until we have seen a sustained period of strong growth, rising incomes and higher employment, as long as that does not pose risks to either price stability or financial stability."
