Bank of England Minutes
Details of the recent Bank of England (BoE) Monetary Policy Committee meeting have just been released to the market. Along with the minutes of this meeting a list of the vote cast by the members has also been published, this month there are no surprises, all nine members of this committee unanimously agreed to leave the Bank’s base interest rate unchanged at 0.5%.
Inflation in the UK is running at a healthy 1.6% while GDP growth is on track for 2.7% this year. These figures would suggest that the BoE has scope to begin a discussion on monetary tightening, the minutes however don’t suggest that the Bank is quiet there yet.
The UK’s recovery is undoubtedly on of the strongest among the developed economies. Structural issues exist that the Bank of England have acknowledged and there is an acceptance that until there is some progress made on these that a precautionary loose monetary policy stance will be maintained.
The blot on the UK’s copy book right now is the size of the current account deficit, this is at record highs. Some relief however was evident this morning in the form of much improved Public Sector Net Borrowing figure. The monthly new borrowing by the UK Government fell sharply from just over £7Bn in February to £4.861Bn in March, this is all the more significant as economists had been expecting this number to rise to over £9Bn this month.
The improving deficit is a step in the right direction but is only one of the challenges being addressed by the British authorities during this recovery. There is also a need to regionally rebalance growth across the country, particularly employment growth which is focused almost exclusively in the more affluent southeastern part of the country. Along with the need to increase investment in certain sectors such as manufacturing the path through recovery for the British authorities is clearly evident.
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