|09-04-2014, 04:29 PM||#1|
Bank of England keeps interest rates unchanged
The BOE decided to hold both interest rates and amount of asset purchases this month, where policymakers will probably hold their monetary stance until making sure recovery is strong enough.
Britain returned to pre-crisis peak by posting its eight consecutive quarterly gain in the second quarter.
The U.K. economy expanded 0.8 percent in the quarter through June, where Europe’s third-biggest economy may record 3 percent growth in 2014.
The recent data from the U.K. has suggested the economy is moving on the right track towards recovery.
U.K. ILO unemployment slipped to the lowest level since the fourth quarter of 2008 to record 6.4 percent in the quarter ended June from 6.5 percent. The number of job seekers retreated by 132,000 to 2.08 million in the second quarter, while the number of workers edged up 167,000 to all-time high of 30.6 million.
However, the improvement in hiring was not accompanied with a similar progress in in wages. Earnings excluding bonuses slowed to 0.6 percent in the second quarter, the lowest level since compiling data in 2001.
Wage growth is “remarkably weak” and there is enough slack in the economy to keep interest rates low, BOE Governor Mark Carney said last month.
The BOE lowered its wage growth forecast to 1.25 percent this year, compared with previous forecasts of 2.5 percent.
Regarding growth, the bank now predicts growth to retreat to 3.25 percent from 3.5 percent.
The latest inflation data has raised concerns as CPI for the year ended July fell to 1.6 percent, taking some steps away from the BOE’s target of 2 percent.
Today’s meeting probably signaled another split among policymakers as some may ask for raising borrowing cost, yet investors will have to wait for the minutes of the meeting due later in the month.
BOE minutes for August showed that the majority of MPC members cited the weak wage growth while stressed that early rise may boost pound, impede rebalancing and CPI outlook didn`t justify rate increase.
On the other hand, MPC members Weal and McCafferty voted for a 0.25% rate increase, as they see that an early rate rise would allow gradual tightening, as rates should anticipate labor market pressure and leave economy exposed to shocks.
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