Bank of England Governor Mark Carney has said the key interest rate will remain at its record-low until the unemployment rate falls below 7%.
Carney's forward guidance is a marked shift away from his predecessor Mervyn King's Monetary Policy Committee (MPC) style and has sparked both praise and criticism.
Here are some of the reactions from politicians, economists, trade unions, and business groups.
George Osborne, Chancellor of the Exchequer
I have always been clear that monetary policy is a key element of the government's macroeconomic strategy, supported by a credible commitment to necessary fiscal consolidation.
In the remit I set tor the MPC on 20 March 2013, I requested that, in forming and communicating its judgements, the Committee should promote understanding of the trade-offs inherent in setting monetary policy to meet a forward-looking inflation target while giving due consideration to output volatility.
I also clarified that the Committee may judge it appropriate to deploy explicit forward guidance including intermediate thresholds in order to influence expectations and thereby meet its objectives more effectively.
I highlighted that this is likely to be most pertinent should the Committee judge spare capacity is likely to persist for a considerable period.
Given the exceptional economic challenges continuing to face the UK economy, I agree with you that forward guidance can play a useful role in enhancing the effectiveness of monetary policy and thereby supporting the recovery.
Ed Balls, Labour's Shadow Chancellor
By recognising the importance of policy action to support jobs and growth, at last we are seeing the Governor show the leadership we have failed to see over the last three years, and are still not seeing from the Chancellor.
Carney is right to warn that the recovery is weak. It is the slowest on record and families are facing a growing cost of living crisis.
But the new Governor is not a miracle worker and monetary policy cannot do the job alone. As we and the International Monetary Fund (IMF) have consistently said Osborne must finally act to support the economy and also help families feeling the squeeze.
This new approach will require careful vigilance from the BoE. Given the high inflation we have seen over the last couple of years it will be very important that the MPC stays vigilant to inflationary risks.
This is kind of leadership the BoE and the country need from the Treasury, not more complacency and inaction from a Chancellor whose plan has failed so badly over the last three years.
John Allan, National Chairman, Federation of Small Businesses (FSB)
Forward guidance linked to unemployment is a profound shift in monetary policy for the BoE.
We welcome this bold and imaginative thinking to secure the recovery. In the longer term, we hope it will give investors and firms looking to grow confidence to bring forward work which will in turn help increase employment.
With around 750,000 new jobs needed before unemployment reaches the 7% rate, the FSB believes that the historically low interest rate will remain for some time to spur on growth. The safeguards - or knock-outs - in place should help to protect the economy from financial instability.
However, for firms to invest, grow and create jobs, they need to access finance. We are pleased to see the strengthening evidence in the report that Funding for Lending is helping small businesses access credit at cheaper rates.
But while the banks have reserves of credit available around four in 10 firms are still refused their application.
Michael Saunders, Citi economist
This statement is fairly close to our expectations, but goes considerably further than the general pre-announcement consensus. We welcome this announcement and highlight several important points.
First, it is a major change from the MPC's normal 'take each meeting as it comes' approach.
Second, the MPC's framework for guidance is quite similar to that of the US' Federal Reserve, combining a firm commitment not to tighten until specified conditions are met, with changeable forecasts of when those conditions will be met.
Third, in our view, today's announcement does not just clarify the MPC's existing reaction function, it also signals a change in their reaction function to a somewhat looser approach.
Until now, the MPC has set monetary policy to anchor their inflation forecast close to the 2% target 18-36 months ahead ... By setting the inflation knockout at 2.5%, the MPC are signalling that they will allow a slightly higher inflation forecast in order to help reduce unemployment and close the output gap. This is consistent with academic literature that central banks at the zero bound should loosen their reaction function to help ensure that the economy achieves escape velocity.
Fourth, this announcement probably paves the way for a further long period of ultra-low interest rates even if (as the MPC expects) the economy recovers steadily ... Our base case remains that the MPC will not hike until 2017.
Neil Williams, Chief Economist for Hermes' Global Government & Inflation Bonds
Governor Carney is right to be cautious about the 'sugar-rush' recovery so far, and keeping his stimulus options, such as quantitative easing (QE), on the table.
At first glance, though, marrying 'forward guidance' on rates with a 2% CPI target deferred another six-12 months to the end of 2015 will worry some he is further subordinating inflation-control to growth considerations. The MPC's choice of unemployment as a policy-yardstick also seems as much as 'puzzle' as the puzzle it has posed them trying to explain it so far.
This experiment will be interesting, and it remains to be seen whether forward guidance ends up being more cosmetic than real, with little added impetus to growth.
With world recovery still groggy, most consumers and firms will doubtless already know that bank rate is staying low for longer, and the 'bells and whistles' attached to guidance - the unemployment rate and so-called 'knock outs' that will nullify guidance - now need be easily communicated to be tested.
Worst of all, guidance could even back-fire if certainty that rates in two years time are likely to be as low as they are today simply defers purchases, which gets us into the realms of 'a Japan'.
More likely, after the sugar rush of this summer's housing, sport and royal-baby-associated growth-spurt and, yet, the prospect in my view, that CPI inflation could shave its 2% target next spring, suggests Carney may eventually pick up the QE baton, later in the year.
TUC General Secretary Frances O'Grady
The TUC has long campaigned for the bank to take account of unemployment when setting economic policy.
Today's announcement shows that the bank understands a real recovery is something that benefits ordinary people, and not just an upward blip in economists' outlooks.
The new Governor's outlook also provides a much needed dose of realism after yesterday's 'Boom Britain' headlines. The Chancellor should heed his warning that the UK is still on course for the slowest recovery in output since records began.
The fact is real wages are set to continue falling throughout 2013 - the longest pay squeeze in over a century- and the bank does not expect unemployment to fall significantly for another three years.
People will ultimately judge the recovery on the availability of good jobs and whether their disposable income is rising again, rather than economic forecasts and partisan spin.
Prof. Philip Booth of the Institute of Economic Affairs
This is the most dangerous development in UK monetary policy since the late 1980s. Monetary policy should be designed to ensure that we have stable prices.
The level of unemployment is mainly determined by a range of factors such a labour market regulation, the benefits system, tax rates and so on. To try to use monetary policy to reduce unemployment when inflation is already above target is playing with fire and could lead us down the road that we followed in the 1970s.
This move also calls into question the independence of the MPC and the BoE's ability to fulfil its statutory duties.
Colin Edwards, economist at the Centre for Economics and Business Research
In offering this forward guidance the Bank of England is performing an interesting balancing act.
On the one hand, it feels that providing increased certainty around monetary policy will encourage businesses and individuals to spend and invest within the economy, knowing that the costs of borrowing - and the incentives to save - are not likely to change. On the other hand, providing an unqualified commitment to low interest rates could place the bank's credibility in jeopardy.
If the recovery gains momentum and inflation begins to edge up - the latest estimates place inflation on the Consumer Price Index at 2.9% - then the bank would no doubt wish to raise interest rates.
With an unqualified commitment to low interest rates, however, the Bank's choice would not be as straightforward. Raising rates would mean going back on its own forward guidance and would risk damaging the bank's credibility.
To cover itself again such an outcome, the bank outlined three 'knockouts' - scenarios under which the base rate of interest may change regardless of the state of unemployment. Specifically these suggest the Bank may review monetary policy if inflation is expected to be above 2.5% 18months to two years ahead, if inflation expectations no longer remain 'sufficiently well' anchored, or if the financial policy committee (FPC) judge that loose monetary policy poses a threat to financial stability.
Essentially then, what we have here is a compromise between a total commitment to a path of interest rates and a desire to retain some flexibility should economic circumstances change.
While this may not be the solid commitment which markets may have hoped for, it does serve to reduce uncertainty by providing further clarification as to the bank's thought processes when setting policy - and that is surely to be welcomed.