Bank of England Quarterly Inflation Report
Mark Carney, the Governor of the Bank of England (BoE) is currently presenting the Bank’s Quarterly Inflation Report. Carney has just announced that the BoE will be sticking to it’s timeline of the second quarter of 2015 for the introduction of interest rate hikes. Most commentators this morning had been expecting that the Governor would announce an acceleration of this time frame to sometime in the first quarter of next year.
Predictions from the Bank’s Governor are for inflation to remain ‘subdued’ due to a stronger than expected British Pound.
Unemployment according to Carney is expected to fall to 5.9% over the next two years, this is significantly better than the February prediction which was 6.4%. The Bank however notes that over half of the new jobs being created are categorized as ‘self-employed’ this suggests that there is still significant slack in the employment market.
The Governor also introduced a slight upgrade to the expected GDP growth rates for the British economy, predictions for a 3.4% expansion remained unchanged but the 2015 forecast was upgraded from 2.7% to 2.9%, no alteration was made to the 2016 projection of 2.8% economic growth. Questioned on whether the 3.4% growth rate predicted for this year was substantial enough to move the UK economy into a new higher cycle of growth the Governor has pointed to the weakness in the supply side of the economy, his comments suggest that growth in this sector is not yet sustainable and that consumer spending is currently supporting the UK’s recovery.
Carney was also asked about the bubble that is beginning to form in the housing market. His response was to deflect this question away from the Monetary Policy Committee and towards the Financial Policy Committee, stating that interest rates are only a ‘last resort’ in this situation.
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