Bank of England governor Mark Carney says the UK recovery has "taken hold" and unemployment will fall sooner than it had forecast.
The comments came in the Bank's latest quarterly inflation report, which raised the forecast for UK economic growth this year and next.
Mr Carney has said the Bank will not consider raising interest rates until the jobless rate falls to 7% or below.
On Wednesday, the UK unemployment rate was reported at 7.6%, down from 7.8%.
The report said: "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."
ChancesIt has given a range of forecasts of when it thinks unemployment could fall to 7%. The most optimistic of these is next year, two years ahead of the time frame it gave in August.
The odds for this are low, though.
The Bank said: "The MPC [Monetary Policy Committee] attaches only a two-in-five chance to the... unemployment rate having reached the 7% threshold by the end of 2014.
"The corresponding figures for the end of 2015 and 2016 are around three in five and two in three respectively."
The Bank said on Wednesday that it was not planning to raise interest rates any time soon from their current record low of 0.5%.
Even when - and if - the jobless rate reaches 7% the Bank will not automatically move to change the cost of borrowing.
HousingInterest rate decisions are traditionally used to control inflation.
There is no obvious pressure for an interest rate rise on that basis, as this week, official figures said inflation had fallen from 2.7% to 2.2% in October.
However, house price inflation is at worryingly high levels in certain parts of the country.
Mr Carney said this was largely affecting more expensive properties: "In terms of housing valuation, there are clearly areas in the country where valuation is very elevated.
"What we are seeing across the UK is the greatest price momentum is for houses that are towards the upper end of the valuation spectrum."
One of the Bank's regulatory bodies, the Financial Policy Committee, is charged with looking out for signs of an overheating property market.
Mr Carney said it was on the look-out for any bubbles, but that there did not seem to be any looming: "The Financial Policy Committee will be vigilant about potential risks there, but we need to put the pick-up in housing activity in perspective.
"Activity levels, while they've picked up, are still running at between two-thirds or three-quarters of historic averages in terms of whether it's transactions or approvals, homebuilding, so there is some room for that to further pick up."
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