Britain's unemployment rate will fall much faster than previously expected due to a strengthening economic recovery, the Bank of England said today.
But it stressed that it was in no hurry to raise interest rates.
Governor Mark Carney committed in August to keep interest rates at a record low 0.5% until unemployment fell to 7% - something the bank hs predicted could take three years.
But in a new set of economic forecasts, the Bank of England said unemployment could hit 7% in the last three months of 2014, if interest rates stay at a record low 0.5%, around two years earlier than it expected in August.
"In the United Kingdom, recovery has finally taken hold. The economy is growing robustly as lifting uncertainty and thawing credit conditions start to unlock pent-up demand," the bank said in its quarterly inflation report.
However, it stressed that it was not about to raise interest rates any time soon, as headwinds remained, particularly from the euro zone.
"The MPC's intention (is) to maintain the exceptionally stimulative stance of monetary policy until there has been a substantial reduction in the degree of economic slack," it said.
Financial markets - which were sceptical about the bank's August unemployment forecast - currently price in a rise in UK interest rates around early 2015.
But if interest rates rise as the market expects, growth will be weaker and unemployment will prove slower to fall, the Bank of England predicted, saying that in this case its mean forecast was for unemployment to stay above 7% until the end of 2016.
The bank said that its central forecasts were now all based on market interest rate expectations, but that did not mean that it believed these rate expectations were correct.
Nonetheless, on this basis it expects inflation to fall below its 2% target at the start of 2015 - six months earlier than it had expected in August.
It also revised up its growth forecasts for the UK economy for this year and next. It sees 0.9% growth in the last three months of 2013, taking full-year growth up to 1.6% compared to 1.4% forecast in August.
For 2014 it expects annual growth of 2.8%, compared to 2.5% predicted in August.
Britain's unemployment rate was nearer 5% before the financial crisis, and deputy governor Charlie Bean suggested last month that the 7% threshold could be lowered if domestic inflation pressures appeared muted.
