22 Jan 2014
BoE Minutes: No immediate need for rate hike if unemployment hits 7% early
FXstreet.com (Łódź) - BoE Minutes from the MPC monetary policy meeting held on 8 and 9 January and released today reveal that the Committee voted unanimously in favor of maintaining the interest rate at 0.5% and the the stock of asset purchases at £375 billion.
The MPC admitted that there was a strong possibility of the unemployment rate dropping to the 7% threshold considerably earlier that projected in November. They stressed however that this would not mean a rate hike as there is “no immediate need” for that, as inflation is back at the BoE's target level. Once the central bank decides to begin rising rates it will do it “only gradually.”
The minutes emphasized the pickup in UK growth at the turn of the year, adding that “the precise pace of growth was uncertain and there were upside risks to the Bank staff’s estimates of growth of a little under 1% per quarter in the fourth quarter of 2013 and the first quarter of 2014.”
According to James Knightley from ING the improving situation on UK labor market and the possibility of GDP growing by 3% in 2014 increase the odds of an interest rate hike this year.
“However, wage pressures remain non-existent and with inflation looking as though it will be well behaved this year the BoE will likely continue to play down the prospect of actual policy tightening until they think this situation is changing,” the expert speculates. “Nonetheless, the UK is likely to raise rates before both the ECB and the Federal Reserve, which should keep sterling supported, particularly against the euro.”
The MPC admitted that there was a strong possibility of the unemployment rate dropping to the 7% threshold considerably earlier that projected in November. They stressed however that this would not mean a rate hike as there is “no immediate need” for that, as inflation is back at the BoE's target level. Once the central bank decides to begin rising rates it will do it “only gradually.”
The minutes emphasized the pickup in UK growth at the turn of the year, adding that “the precise pace of growth was uncertain and there were upside risks to the Bank staff’s estimates of growth of a little under 1% per quarter in the fourth quarter of 2013 and the first quarter of 2014.”
According to James Knightley from ING the improving situation on UK labor market and the possibility of GDP growing by 3% in 2014 increase the odds of an interest rate hike this year.
“However, wage pressures remain non-existent and with inflation looking as though it will be well behaved this year the BoE will likely continue to play down the prospect of actual policy tightening until they think this situation is changing,” the expert speculates. “Nonetheless, the UK is likely to raise rates before both the ECB and the Federal Reserve, which should keep sterling supported, particularly against the euro.”