Bank of England Lifts Growth and Inflation Forecasts
The Bank of England on Wednesday raised slightly its forecasts for growth and inflation in Britain, and gave further indications it was getting closer to gradually increasing interest rates.
“The committee’s guidance remains the same: The increases in bank rate, when they come, are likely to be gradual and limited,” Mark J. Carney, the governor of the Bank of England, said at a news conference.
Analysts have said that they expect the central bank to raise its lending rate this year or early next year from the record-low 0.5 percent.
In its quarterly Inflation Report on Wednesday, the bank predicted that the British economy would grow at an annual pace of 3.5 percent in 2014, slightly faster than the 3.4 percent growth it had forecast in May. For 2015, the bank maintained its estimate of 2.9 percent annual growth.
The central bank said that it expected inflation to be 1.9 percent by the end of the year, up slightly from its May projection of 1.8 percent. Inflation would remain at slightly lower levels for 2015 and 2016, the bank said. Annual inflation reached 1.9 percent at the end of June, up from 1.5 percent in May, according to the most recent British data.
Separately on Wednesday, the Office for National Statistics reported that Britain’s unemployment rate fell to 6.4 percent in the second quarter, the lowest level since late 2008. Earlier this year, as employment increased faster than expected, the Bank of England backed away from its plan to consider raising key lending rates as soon as unemployment fell below 7 percent.
In the second quarter, the number of people employed in Britain increased to 30.6 million, driven in part by a nearly 10 percent jump in the number of people who identified themselves as self-employed. The number of people working increased by 167,000 from the end of March.
But the annual growth rate for pay was down 1.5 percent in April as some employers who usually pay bonuses in March instead last year paid them in April, the statistics office said.
For the quarter, pay, including bonuses, was 0.2 percent lower than in the period a year earlier. Excluding bonuses, average pay in Britain was up 0.6 percent from the second quarter of 2013.
Source: NYT
