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Rates Unchanged Another Year

Written By On 14/05/2014

Bank of England governor Mark Carney has indicated that interest rates will remain unchanged this year as he announced that
the economy has started to head back to normal
.

The Bank upgraded their growth forecasts. They have increased second quarter growth by 0.1 per cent bringing the new prediction to 0.8 per cent. However, this year stays the same as their previous forecast at 3.4 per cent.

The BOE's newest inflation report forecasts a rise of 0.2 per cent for next year, altering their prediction from three months ago to 2.9 per cent.

Mr Carney added

the economy has edged closer to where rates will need to gradually rise
.

Some financial experts have been suggesting that inflationary and unemployment pressure will force the BOE's hand to start raising interest rates as early as this year. But the Committee believe that the economy has 'significant slack' to continue it's growth without affecting inflation.

They commented:

The Committee judged that there was scope to make further inroads into slack before an increase in Bank rate was necessary
.

Many analysts have recently been predicting that interest rates will begin to hike in the first quarter of next year. But because the Bank are assessing their criteria through market expectations, it appears that conditions remain the same as the previous inflation report from three months ago.

Therefore this would translate into rates staying at their record low until the second quarter of next year.

The Bank anticipate the pace of productivity to slow down which will cause the jobless total to diminish even quicker, thus using any slack being left in the UK economy.

Unemployment is now forecast to fall below 6 per cent within three and a half years, which is down once more from the predicted former rate of 6.3 per cent.

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