- Capital Economics
The Bank of England is another institution, which offers no surprises for traders, as in order to avoid any turmoil in financial markets Mark Carney tries to stick to his adjusted forward guidance. Some of the members, however, still do not completely understand the term "slack" and members are divided on when and how to revise the monetary policy.
Minutes from the April's 9 meeting showed that domestic economy is building up steam; however, policymakers are divided about the assessment of the amount of slack in the economy and the medium-term economic outlook. The central bank expects a growth of 1% in the first quarter, accelerating from a 0.9% expansion recorded in the preceding quarter. Regarding the second quarter, however, the bank expects a slight cool down. One of the worrying signs remains a constantly increasing current account deficit, which now equals 5.2% of the overall economic output. Members also agreed that inflation will pick up soon; however, the probability the CPI will stand at 2.5% over the next 18-24 months, decreased to 50%. There is also a growing uncertainty surrounding the remaining slack in the labour markets and other sectors. The latest unemployment figures are pointing at the ongoing and broadening recovery as wage growth met inflation. The cable was fluctuating around 1.6819 after the release of the minutes, almost unchanged from the level recorded before the report.
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