The Bank of England Wednesday said the UK's economy is set to grow faster than it had expected in August, but stressed that a subdued outlook for inflation means it is still unlikely to raise interest rates soon. Releasing its latest quarterly forecasts, the BOE said the unemployment rate may fall to 7% much earlier than it had previously thought, an indication that it could consider raising its benchmark interest rate earlier than anticipated. Also on Wednesday, the UK unemployment rate was reported at 7.6%, down from 7.8%.
In its quarterly forecast, published on Wednesday, the Monetary Policy Committee said there was a 50/50 chance unemployment would fall to 7% in the fourth quarter of 2014. In August the policy committee said that the figure was likely to remain above this threshold until summer 2016.
Carney, BoE governor, stressed that rates could remain on hold at 0.5%, even
after unemployment dips below the 7% threshold.
Reuters reports that the Bank also
revised up its growth forecasts 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.
Sterling jumped and British government bond prices dropped to their lowest level in four weeks as investors adjusted to the Bank's new, shorter timeframe for when unemployment might fall to its threshold for considering an interest rate hike.
The Office for National Statistics
[pdf] today that employment rate for those aged from 16 to 64 for July to
September 2013 was 71.8%, up 0.3 percentage points from April to June 2013.
There were 29.95m people in employment aged 16 and over, up 177,000 from April
to June 2013.
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