Carney should heed employment experts before rate decision | Larry Elliott

Bank of England - set for August rise - has been consistently wrong about labour market

The message from the Bank of England has been clear: get ready for an August increase in interest rates. Modestly higher official borrowing costs are needed to prevent the economy from overheating.

This, of course, is exactly what Threadneedle Street was saying three months ago. Back then it had convinced the City that a May rate increase was pretty much a done deal but then got cold feet as weak economic data from the first three months of 2018 poured in.

Related: Bank of England expert: World Cup feelgood factor backs case for rate rise

"It is our contention that the natural rate of unemployment in most advanced countries is well below 4% and perhaps even below 3%.

Employment rates and participation rates can rise, and unemployment rates can fall and by a lot. Globalisation has weakened workers' bargaining power. Migrant flows may have put downward pressure on wages and greased the wheels of the labour market as their presence increased mobility. The decline in the home ownership, which slows job creation and increases unemployment, has helped mobility and lowered the natural rate."