The governor of the Bank of England , Mark Carney , yesterday sought to reassure businesses that interest rates would remain at historically low levels. Carney told British business leaders in Davos that the Bank was already "starting to put on the brake" amid fears that the recent sharp rise in house prices was the start of a new bubble. The governor admitted that the recent fall in unemployment would force a re-think of the Bank's forward guidance policy - the pledge not to even discuss raising interest rates from 0.5% until the jobless rate falls to 7%. But he insisted the economy remained well short of achieving "escape velocity" and that the Bank was already using an array of policy tools to control the housing market. The governor said there would already be upward pressure on interest rates had the Bank's financial policy committee not started to use new powers at its disposal, which include higher underwriting standards for lenders and the withdrawal of incentives for banks to lend to the mortgage market. He added that stress tests planned for later this year would focus on banks' exposure to the mortgage market. "We started by taking our foot off the accelerator," Carney said. "We are now starting to brake a bit." Carney said the Bank's monetary policy committee would look at its forward guidance strategy after the sharper than expected fall in unemployment before a decision next month. Bank sources made it clear that all options were being considered, including scrapping the scheme entirely. Many economists expect unemployment to hit 7% within a couple of months, but Carney said this would not lead to rates being raised from 0.5%, where they have been since early 2009, because inflationary pressures remained weak. 7% The unemployment rate above which the Bank has pledged to rule out the possibility of raising interest rates from 0.5%
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