MPC members more optimistic about inflation

Wednesday, Apr 22 2015

Bank of England policymakers have grown more upbeat about the outlook for the euro zone and see a greater chance that inflation could recover strongly next year, minutes of their April policy meeting showed on Wednesday. The minutes of the April 8-9 meeting of the Monetary Policy Committee showed that the officials voted unanimously to keep rates steady at a record-low 0.5 percent, but that for two members this decision remained "finely balanced".

The central bank said that British domestic data had been broadly in line with what they expected when the central bank made its last set of forecasts in February, but that the euro zone appeared to be recovering more strongly than thought."Although it was too early to be confident, a succession of firmer data suggested that growth in the euro area economy was picking up," the BoE said.

However, policymakers appeared slightly more focused on upside risks to British inflation than in previous months. Strong economic growth was unlikely to be able to continue without pushing up prices and wages, which needed to grow faster to help the BoE hit its 2 percent inflation target.

The central bank also noted the possibility that sterling strength had been having a more rapid than expected effect on inflation, implying that inflation could then bounce back more strongly when temporary downward pressures on prices faded.Governor Mark Carney and other policymakers have said they expect the next move by the Bank to be a rate hike.

After the Minutes Sterling was pushed higher and is currently being traded few points above 1.50 handle. Pair is likely to find support around 1.4930 handle and resistance above 1.5050 area. Later today, in the US session, Existing Home Sales figures are scheduled for a release.

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