20 Nov 2013
BoE Minutes: MPC voted unanimously to keep rates, QE steady
FXstreet.com (Barcelona) - BoE Minutes from the MPC monetary policy meeting held on 6 and 7 November and released today reveal that the Committee voted unanimously in favor of maintaining the interest rate at 0.5% and the stock of asset purchases at £375 billion.
According to the minutes, the MPC saw a stable recovery in UK activity and predicted that the country's economy would expand above the long-term average in the second quarter of the year. Later on, the GDP outlook would be subject to upside (strengthening of confidence and improving credit conditions) and downside risks (balance sheet repair process and slow income growth hurting demand) .
The MPC pointed to the still fragile situation in the Eurozone, which could hurt UK growth, and suggested that “with the external environment unlikely to be an engine of UK growth, and given that the domestic fiscal consolidation would continue over the forecast period at around its current rate, a successful handover from household to business spending would play a crucial role in underpinning the recovery in the medium term.”
Despite the recent rise in inflation expectations, the MPC judged them to be well anchored in the medium term, as they currently do not play a significant role in wage demands.
James Knightley from ING comments: “While the BoE signaled last week the possibility of raising interest rates a year earlier than they had previously predicted, we still see the potential for them to move in 1Q15. The unemployment rate is dropping swiftly, the economy is creating jobs, business surveys are accelerating and house prices are gaining momentum.”
“Furthermore, we are looking for the UK to grow 2.7% in 2014 and expect inflation to remain above target over the next couple of years. Such an environment should ultimately lead to sterling strength against the euro.”
According to the minutes, the MPC saw a stable recovery in UK activity and predicted that the country's economy would expand above the long-term average in the second quarter of the year. Later on, the GDP outlook would be subject to upside (strengthening of confidence and improving credit conditions) and downside risks (balance sheet repair process and slow income growth hurting demand) .
The MPC pointed to the still fragile situation in the Eurozone, which could hurt UK growth, and suggested that “with the external environment unlikely to be an engine of UK growth, and given that the domestic fiscal consolidation would continue over the forecast period at around its current rate, a successful handover from household to business spending would play a crucial role in underpinning the recovery in the medium term.”
Despite the recent rise in inflation expectations, the MPC judged them to be well anchored in the medium term, as they currently do not play a significant role in wage demands.
James Knightley from ING comments: “While the BoE signaled last week the possibility of raising interest rates a year earlier than they had previously predicted, we still see the potential for them to move in 1Q15. The unemployment rate is dropping swiftly, the economy is creating jobs, business surveys are accelerating and house prices are gaining momentum.”
“Furthermore, we are looking for the UK to grow 2.7% in 2014 and expect inflation to remain above target over the next couple of years. Such an environment should ultimately lead to sterling strength against the euro.”