Special Reports |
Written by ActionForex.com |
Sep 18 13 11:12 GMT
BOE Raised GDP Forecasts, Further Easing Unnecessary As Recovery Gains Traction
The minutes for the September BOE meeting sent the pound higher as policymakers turned more optimistic over the economic recovery in the UK and expected no further stimulus was needed. The nine voting MPC members decided unanimously to leave the bank rate unchanged at 0.5% and the asset purchase program at 375B pound. Policymakers raised their economic forecast for the third quarter of 2013 as driven by upbeat data in the second quarter of the year. The pound's strength accelerated after the minutes and is currently trading at a eight-month higher against the US dollar.
On the economic developments, the minutes unveiled policymakers' confidence after data released over the past month has shown signs of recovery. As stated in the minutes, 'over the month the evidence was consistent with a recovery at least as strong as that expected at the time of the August Inflation Report'. The minutes also outlined the pickup of economic activities in the Eurozone, describing that the growth 'had been slightly more brisk than the Committee had judged likely at the time of the August Inflation Report'. Moreover, 'it was somewhat reassuring that the increase in output had been broadly based across countries within the area, albeit that German growth had probably been boosted by a weather-related recovery in output. Both the manufacturing and services area-wide purchasing managers' indices (PMIs) had increased in August'.
Policymakers raised slightly their assessment for the economic growth for 3Q13 to +0.7%, from +0.5% projected in the August Inflation Report. The optimism came from the 'modestly promising data' released in 2Q13. Meanwhile, the central bank suggested that 'early indicators for activity in Q4 tentatively suggested further strengthening towards the end of the year. Overall, these data provided further evidence in support of the pickup in growth assumed at the time of the August Inflation Report and, if anything, posed an upside risk to that path'.
The MPC members voted unanimously to leave the bank rate unchanged at 0.5% and the asset purchase program at 375B pound. Policymakers also agreed that there's a need to 'emphasize in its public communication that the 7% threshold for the unemployment rate was not a ‘trigger' that was mechanically linked to subsequent movements in bank rate'. The BOE also stressed that actual unemployment rates could be markedly different from the forecasts as'relatively small changes in assumptions regarding the future evolution of, for instance, productivity growth or labor market'.