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19 Feb 2014
BoE Minutes: Scope remains to absorb spare capacity further before raising bank rate
FXStreet (Łódź) - The BoE Minutes from the MPC monetary policy meeting held on 5 and 6 February and released today revealed that the Committee voted unanimously in favor of maintaining the interest rate at 0.5% and the stock of asset purchases at £375 billion.
UK inflation slowed down back to the 2% target in December, partly due to the strength of the pound. The MPC expects the CPI rate to stay close or slightly below the 2% over the forecast period and indicates that the inflation outlook depends on “the pace at which slack was
absorbed and the impact that slack had on wages and prices” as well as the moves in commodity prices and in the exchange rate.
Domestic recovery has been advancing steadily, in line with projections, while unemployment had fallen more sharply than expected. Growth remained robust, although productivity has been lagging behind. The MPC expects UK recovery momentum to continue in coming quarters. The recent emerging volatility poses a downside risk to the recovery, but on the other hand concerns about the Eurozone economy have eased.
Furthermore, the MPC indicated that with the unemployment rate still above the 7% threshold, it was decided that the current policy guidance should remain unchanged.
According to the minutes: “The Committee judged that there remained scope to absorb spare capacity further before raising Bank Rate. When Bank Rate did begin to rise, it expected that the appropriate path, so as to eliminate slack over the next two or three years and keep inflation close to target,would be gradual.”
UK inflation slowed down back to the 2% target in December, partly due to the strength of the pound. The MPC expects the CPI rate to stay close or slightly below the 2% over the forecast period and indicates that the inflation outlook depends on “the pace at which slack was
absorbed and the impact that slack had on wages and prices” as well as the moves in commodity prices and in the exchange rate.
Domestic recovery has been advancing steadily, in line with projections, while unemployment had fallen more sharply than expected. Growth remained robust, although productivity has been lagging behind. The MPC expects UK recovery momentum to continue in coming quarters. The recent emerging volatility poses a downside risk to the recovery, but on the other hand concerns about the Eurozone economy have eased.
Furthermore, the MPC indicated that with the unemployment rate still above the 7% threshold, it was decided that the current policy guidance should remain unchanged.
According to the minutes: “The Committee judged that there remained scope to absorb spare capacity further before raising Bank Rate. When Bank Rate did begin to rise, it expected that the appropriate path, so as to eliminate slack over the next two or three years and keep inflation close to target,would be gradual.”