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UK Leading Index Remains Static

James Boston
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The UK Conference Board has released it’s pervasive Leading Index figure this morning, this measure attempts to capture the future trends in British economic activity. At 0.5% however the latest reading, for the month of May, produced nothing in the way of expansion over the April number.

Despite no change in this particular indicator, the UK economic situation is widely considered to be in a strong position. The Bank of England (BoE) yesterday however shied away from adjusting the base interest rate, as it has done on every occasion for the past five years, in a move designed to allow some further breathing room for the UK’s recovery to stabilize. The Bank also made now moves to reduce it’s holding of £375Bn of sovereign bonds that it amassed during the crises years.

Forward guidance is suggesting that any monetary tightening in the UK will not be considered until some point in the first half of next year. This however is becoming a more fluid situation with many observers now suggesting that the timeline is too long and that the British economy will need dampening before the end of 2014. This is a particularly pertinent situation in light of the runaway rise in house prices, some areas of the Capital are now showing 18% annual growth in residential prices while the country as a whole is recording house price expansion at over 10%, and accelerating.

To date the voting at the Monetary Policy Committee (MPC) has been unanimous, it has been over three years since any vote was recorded as different from 9-0 and there is no expectation that the minutes of yesterday’s meeting will report any deviation from this. It is also however very unlikely that a rate hike will come out of the blue in the coming months, a gradual move away from unanimous voting will most likely precipitate any MPC action.

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