Share

BoE’s Haldane says United Kingdom economic growth not spectacular

In a move that wrecked the pound last week, the Bank of England kept interest rates at 0.5% and, in the eyes of many central bank watchers, pushed the prospect of those rates rising until sometime next year.

Advertisement

GBP is still expected to gain against the beleaguered euro as we head through 2016 on the basis of divergent monetary policy between the Bank of England and European Central Bank, regardless of whether the Bank of England hikes rates today, tomorrow or in May, as we still think will actually come to pass. Yet ten of the 43 participants in Tuesday’s poll still expect the Bank to hike rates earlier than then. A day after Carney took the stage, the USA nonfarm payrolls report blew past forecasts, sending the dollar index to a six-month high as federal funds futures moved to price in a 70 percent chance of a December rate hike.

“That’s one of the key headwinds to global growth at the moment, and we will track those developments across emerging markets, and of course elsewhere too, very closely”, he said. Inflation is now expected to stay below 1 percent until the second half of 2016, later than previously thought, as sterling energy prices are forecast to be 15 percent lower than Bank projections from February this year. Export growth of +2.5% (same).

Mr Carney said: “Our job is to keep inflation on target and it’s to make sure that there’s financial stability – that the financial system functions as it should – regardless of the relationship between the United Kingdom and Europe, and we’ll continue to do that”. The number of unemployed fell by 103,000, the biggest quarterly fall for a year.

For most of the period since the financial crisis, average earnings in Britain lagged inflation.

Britain’s economy has grown strongly over the past two years but the pace of expansion has moderated recently and inflation has fallen below zero, complicating the outlook for officials judging when to raise borrowing costs.

Advertisement

However, wage growth remains weaker than before the downturn, something the Bank of England has stressed as it explains why it is keeping interest rate at a record low.

UK wage growth