Minutes from the Bank of England November Monetary Policy Committee meeting reiterate that the Bank believes there may be a case for not raising rates immediately after unemployment falls to the seven per cent threshold rate - the seven per cent is a marker, not a trigger. A scan of the minutes shows no fundamental change in the Bank's forward guidance policy.
Members agreed that unemployment is likely to fall further over the next three months:
With the proviso that medium-term inflation expectations remained sufficiently well anchored, the projections for growth and inflation under constant Bank Rate underlined that there could be a case for not raising Bank Rate immediately when the seven per cent unemployment threshold was reached.
The MPC voted unanimously to keep the quantitative easing total at £375bn.
The Bank sees the rise in CPI expectations to be of "little" significance. The recovery has picked up momentum since August but, agreed the MPC, none of the guidance knockouts have been breached. The "durability of recovery" is still uncertain, along with "the extent to which dupply growth would keep pace with demand", but there is an upside risk from rising confidence and improving credit.
The pound dropped following the released of the minutes. Sterling slid to $1.6126, having been at $1.6140 immediately before their release.
Capital Economics has created a chart showing the latest Bank of England agents’ scores (which follow discussions with around 700 businesses) and are published alongside the minutes. The scores, it says, show "a further pick-up in activity in October across all major sectors of the economy." This, says chief European economist Jonathan Loynes, appears to "support other evidence that the economic recovery has accelerated further in the fourth quarter."
Howard Archer, IHS Global Insight:
The minutes of the November MPC minutes hardly come across as hawkish, despite the Bank of England’s upgraded growth and unemployment forecasts. Indeed, the minutes support the view that the Bank remains in no hurry whatsoever to raise interest rates. As such, the minutes may slightly dilute market expectations that the Bank of England will start raising interest rates early in 2015, or even in late 2014.