Jobs market surge catches Bank of England by surprise
The strength of the jobs market has caught rate-setters at the Bank of England off guard, official minutes from the monetary policy committee revealed today.
Threadneedle Street said it “seemed probable” unemployment would be lower in the second half of 2013 than the Bank expected in its August Inflation Report.
Under its new forward guidance policy, the Bank has pledged to keep rates on hold until unemployment falls below 7%, which it initially expected to occur in the second half of 2016.
However, robust growth in employment since the summer, which has pushed the jobless rate down from 7.8% to 7.7%, has prompted Threadneedle Street to recalculate and the central bank is now likely to revise its jobless forecasts down next month.
Money market rates show City traders expect the Bank, led by Mark Carney, to start raising policy rates in early 2015, but Bank policymakers have repeatedly stressed that even if unemployment does drop rapidly to 7% it would not necessarily trigger a rate hike.
And today’s minutes showed some MPC members feel it is “too soon” to judge how productivity will respond to the recovery. A pick-up in productivity — output per hour worked — could dampen employment growth.
Yet some City analysts today reiterated their expectations of an early rate rise. “We still feel policy tightening could start in early 2015,” said James Knightley of ING.
The minutes also showed the nine-man MPC voted unanimously earlier this month to keep its £375 billion quantitative easing policy on hold, as the economy continues to strengthen.
Members further said that GDP growth was likely to average 0.7% a quarter in the second half of the year, an upward revision from their August forecast.
They said there was little likelihood of the inflation “knockout” for forward guidance being triggered and noted that the recent strengthening of sterling would help contain domestic price rises.
On Friday the Office for National Statistics will release its first estimate of growth in the third quarter of 2013, with City economists predicting a 0.8% expansion over the three-month period.
Following 0.4% growth in the first quarter and 0.7% in the second, this would represent the strongest period of UK growth since 2010.
- 1 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 4 John Travolta addresses former pilot's gay romance allegations publicly for the first time
Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
Scottish independence: Police will be on high alert on Friday whatever the result
John Travolta addresses former pilot's gay romance allegations publicly for the first time
QS university world rankings: Imperial College London leapfrogs Oxford to join Cambridge as best British university
Scottish independence exclusive: Millions of banknotes sent to Scotland in case Yes vote sparks run on ATMs
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
iJobs Money & Business
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...