BoE left interest rates unchanged opting for stronger wage growth

Wednesday, Dec 17 2014

BoE released its Meeting Minutes from their latest meeting. Minutes showed that BoE decided ti keep interest rates at a record low this month with majority of members stating that “promising” pickup in wage growth wasn’t enough to raise concerns about the outlook for medium-term inflation.“As yet, pay growth was only roughly in line with, rather than in excess of, officials said in the minutes.

Further increases would be required “to be consistent” with meeting the 2 percent inflation goal, it was said. While there was a risk U.K. economic growth might soften further than anticipated, there was also a chance that slack could be eroded faster than forecast, boosting inflation. “As before, individual members ascribed different probabilities to these risks.”

As it was last month, for two Committee members Martin Weale and Ian McCafferty, a rate increase now was justified. They said policy makers should look through the short-term price movements that had pushed inflation down to 1 percent, and a drop in unemployment was “consistent with the rapid absorption of slack.” They also said it was possible that the “real rate of interest consistent with stable inflation over the medium term was now rising.”

After the report Sterling initially went down but managed to rebound and is currently being traded around 1.5720 level, as nothing new was stated in the Minutes. Later today, in the US session, CPI data is scheduled for a release, while we can expect a lot of volatility coming from Fed interest rate decision and the following statement.

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