In case you weren’t able to get your hands on the minutes of the latest BOE monetary policy meeting, let me give you a quick rundown of what went down. Here’s a summary of the main economic points discussed:
1. Mixed views on economic performance
First, the good news: Minutes of the meeting indicated that most MPC members agreed that economic activity is picking up. They even upgraded their Q1 2014 growth forecast from an initial estimate of 0.9% to 1.0%.
Now for the not so good news: The report also showed that policymakers expect growth to slow down in the second quarter of this year. “There was considerable uncertainty about the amount of slack remaining within the economy and committee members had a range of opinions on this and the outlook for inflation in the medium-term,” according to the press release.
2. Concerns about inflation
One of the main economic uncertainties highlighted in the meeting minutes was that of inflation. Of course this shouldn’t really be much of a surprise since the central bank’s mandate is to maintain price stability after all!
In the U.K. economy’s case, inflation has dropped from 1.7% in February to 1.6% in March, its lowest level since October 2009. This is also far below the BOE’s annual CPI target of 2%, which means that Governor Carney and his men really shouldn’t be tightening monetary policy just yet.
3. Persistent labor market slack
Another factor that’s preventing the BOE from being extra confident about economic performance is the persistent labor market slack. Recall that their forward guidance indicated that the central bank could consider hiking rates once the jobless rate hits 7%, but it seems that policymakers no longer believe that this particular data point paints an accurate picture of the jobs situation.
In particular, policymakers noted that the latest “improvement” in the jobs report was mostly spurred by a surge in self-employment. “Members of the committee held a range of views about the extent to which self-employment represented a form of labour market slack,” the minutes showed. With that, additional data measuring spare capacity would also be scrutinized while making monetary policy decisions.
There you have it, ladies and gents! Not as hawkish as pound bulls would like it to be, huh? At least it’s not as bad as the FOMC minutes, which cast plenty of doubts on Yellen’s rate hike forecast! With that in mind, do you think that the GBP/USD uptrend will still stay intact? Cast your votes in our poll below!