(MENAFN– ecpulse) BOE minutes for March’s meeting showed that policymakers were unanimous to holding interest rate and amount of asset purchases.
The BOE want to ensure investors that interest rates would remain at the current low level of 0.5 percent until unemployment drops to 7 percent.
The minutes stressed on the risk of the pound’s appreciation as it puts downside pressure on inflation, which retreated below the BOE’s target to 1.9 percent.
“Sterling has appreciated by another 1.5 percent during this month, and it was possible that this gradual appreciations would continue if prospects in the U.K. continued to be seen as increasingly favorable relative to those of it’s main trading partners,” minutes said.
MPC members referred that the forward guidance updated in February was “mistakenly interpreted as signaling the prospect of markedly different monetary stance.”
On the economic front, the minutes said there are clearer signs of progress, but some time is needed to guarantee both “balanced and sustainable” recovery trajectory. Carney illustrated there is scope to keep interest rate at its record low for a while.
Inflation is likely to remain above 2.5 percent in 18-24 months unless the sterling’s appreciation made that prospect a little less likely.
Later in the day, Chancellor of the Exchequer George Osborne will announce his annual budget to Parliament.
UK Unemployment Steadies
A report released on Wednesday showed that U.K. ILO unemployment for the three months through January lingered at 7.2 percent, in line with median forecasts.
The number of job seekers retreated by 63,000 to 2.33 million in the three months through January, while the number of workers edged up 105,000 to 30.2 million.
The BOE has mentioned that raising interest rate will not only depend on unemployment rate but also on other measures such as business surveys and the number of hours worked. In other words, a broader range of spare capacity.
Once the 7 percent threshold has been reached, the BOE will shift attention to eliminating spare capacity while holding inflation near the bank’s target, BOE Governor Mark Carney said.
In February, jobless claims dropped 34,600 from a revised of 33,900 drop in January and median forecast of 25,000 fall.
As of 10:00 GMT, the pound traded around 1.6619 versus the U.S. dollar after hitting a peak of 1.6638.
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