Bank of England reported that the U.K. economy is getting stronger whilst inflation remains subdued, according to the minutes of its Monetary Policy Committee’s meeting held on April 9 that were released on Wednesday.
“The domestic economy was building momentum with some signs of modest rebalancing toward investment,” said BOE. It added that recent surveys show that economic growth may hover near 1 percent in the first six months of 2014.
BOE officials also voted overwhelmingly to maintain the benchmark rate at 0.5 percent this April and to retain purchased asset stocks at 375 billion pounds ($630 billion). The central bank also said that jobless rate was still higher than the 7 percent ceiling that it has set. Inflation was still less than its 2 percent target, with the committee saying inflation pressures have eased in the last month.
Bank of England Governor Mark Carney said though the economy is improving, it still has to absorb some unused capacity before benchmark rate is hiked. The stronger British pound appears to have kept inflation under check. The sterling touched its highest peak since November 2009 on April as demand for U.K. assets rose due to strengthening economy. The pound remained slightly unchanged at $1.6817 as of mid-morning in London trading.
BOE officials pointed out that the improving labor market may lay the “foundation for more sustained growth in real income.”“It was possible that a sustainable rise in real wages and incomes, consistent with a durable recovery in demand and output, was in prospect,” said MPC in its minutes, according to Bloomberg.
British unemployment rate plunged to 6.9 percent in February, fuelling speculation that BOE may move in to hike interest rates. However, the policymakers are currently focused on ruling out any economic slack before they can do so.
“There was considerable uncertainty about the amount of slack remaining within the economy, and committee members had a range of opinions on this and the outlook for inflation in the medium term,” Wednesday’s minutes said. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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