- Bank of England
The Bank of England cut its near-term inflation projections, but stressed that it expects inflation to return to the central bank's official target by the end of the three-year forecast period. In its latest release of the Inflation Report the Old Lady of the Threadneedle Street has sharply slashed the consumer price inflation, as lower food, energy as well as import prices weigh on consumer prices. The latest data showed inflation has fallen unexpectedly fast to the lowest level in five years of 1.2%, and the BoE see the gauge falling to 1% by the first quarter of 2015. The BoE also signalled later-than-expected first interest rate lift, pushing it from February to October of 2015, noting those expectations are in line with the inflation outlook for the three-year forecasting period. The gloomier outlook reflects worsening prospects for the neighbouring Euro zone and the global economy, as well as subdued domestic wage growth. The BoE said it expects the British economy to expand 3.5% in 2014, but projects growth will slow in 2015 and 2016. It revised downwards its forecast for annual growth in 2015 to 2.9% from 3.1% in August and its outlook for 2016 to 2.6% from 2.8%. The central bank also still expects a substantial rebound in wage growth next year, with wages climbing by 3.25%, a rate not seen since the financial crisis, following growth of 1.25% this year. As to the unemployment rate, the BoE sees more modest drops ahead, with the jobless rate falling to 5.4% by late 2015.
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