Bank of England: Watch Wages for Rate Signs

Samuel SharpFeb 03, 2017

Minutes of the latest Monetary Policy Committee (MPC) decision showed policymakers voted unanimously to keep United Kingdom rates on hold at 0.25 per cent as the bank made sweeping upgrades to its growth outlook.

The Bank's forecast for 2017 gross domestic product was lifted significantly to 2% from the 1.4% predicted in November and dire warnings about the impact of Brexit issued earlier past year.

Inflation is seen peaking at around 2.8 percent at the start of next year - way above the bank's 2.0percent target, but Carney was relaxed about that.

Members of the Bank's monetary policy committee voted unanimously to keep interest rates on hold at 0.25%, and the Bank's forecasts assumed no hike until the end of next year. Last May, he said that a vote for Brexit would pose an "immediate and significant threat" to the United Kingdom economy, increasing unemployment, hitting growth, possibly to the point of recession.

Inflation is already set to overshoot the Bank's 2 percent target in the coming months.

The wonder is now why on Earth the Bank of England kept interest rates at 0.25 per cent?

"The bank noted that "attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth".

It added that a solid global economy, surging stock markets and cheap borrowing were also helping support growth.


While that would be more than double the forecast the Bank made in August, a few weeks after the referendum, and higher than its November forecast of 1.4 percent, it would still represent a slight slowdown from previous year.

He said he expected a "significant slowing of consumer spending over the next year or two" as a strong increase in inflation eats into the spending power of many households.

"There are limits to the extent that above-target inflation can be tolerated", the minutes said. This could mean we see the first interest rate rise in more than a decade at some point this year, particularly if wage growth turns out stronger than expected.

The Bank of England has effectively written out any negative impacts to the United Kingdom economy pertaining to Brexit in their latest forecasts.

"For instance, if spending growth slows more abruptly than expected, there is scope for monetary policy to be loosened", it said.

"Since the November Inflation report there has been plenty of positive data, with growth of 0.6% in the final quarter".

Sterling began its descent at midday following the release of the central bank's February Inflation Report and interest rate decision.

Related Articles:



« Previous article
Next article »


Popular Pages

Rex Tillerson Has Just Been Confirmed as Secretary of State
Eventually, Tillerson narrowly won approval from the Senate Foreign Relations Committee in a 10-11 vote along party lines. If successful, that will set in motion a maximum 30-hour debate before a final vote on the Senate Floor.

Iran summons Swiss envoy over Trump visa ban
Trump never expected to win and you know he won and he sort of cobbled together this team that helped him in the election. Diplomats and members of global organisations are not affected by the ban.

Shinzo Abe teases U.S. carmakers after Trump raises low imports
Japan is a key US ally in Asia, but Trump has used it as a verbal punching bag on the campaign trail and as president. "It's not only President Trump, but USA officials at all levels often bring this up", Abe said.

Six killed in 'terrorist' attack on Quebec mosque
Fox News and other media outlets earnestly reported Monday morning that the suspect was of Moroccan origin. Six people were killed and eight wounded in the gun attack at the mosque during Sunday night prayers.

Rahul Gandhi to start election campaign in Punjab today
He said, Pakistan is always alert to exploit the situation and eager to stoke trouble in India whenever there is a weak government in Punjab.

Instagram is Testing Multi-Photo Posts
Facebook owned photo-sharing platform Instagram is found testing a new feature that will enable users to post multi-photo albums. It is now being tested by advertisers on the platform, and hopefully if all goes well, we could see it available for every user.

European Union house targets Le Pen salary
The money the European Parliament wants returned was used to pay the salary of Catherine Griset, a close friend of Le Pen as well as her cabinet director.

Walgreens and Rite Aid Agree to Cut Deal Price, Sell More Stores
The new price is pegged at a minimum of $6.50 per share if the company is required to sell off 1,000 or fewer locations. The announcement Monday comes after weeks of haggling with FTC lawyers on a way for Walgreens to buy Rite Aid .

Dakota Access Pipeline Actually Hasn't Gotten The Green Light Yet
The Vermont Democratic Party fully supports the Standing Rock Sioux Nation's heritage and their work in North Dakota. Army Corps of Engineers lacks statutory authority to issue the easement because it has committed to the EIS process.

President Trump's wall to be built with U.S. taxpayer funds
Peña Nieto, who has long refused to pay for a wall, responded by canceling his trip to the White House next week. He said his government would do everything possible to protect the rights of migrants in the United States.