- BoE Governor Mark Carney
While the economy is recovering, the central bank now is aiming at eliminating any slack within the domestic economy. Nevertheless, the amount of slack in the economy vary widely and cannot be identified precisely. Currently, the BoE is expressing its concerns about the productivity. Their estimates are showing there is still a spare capacity equivalent to almost 1.5% of the GDP, based on factors like the number of people unemployed and those wanting to work more. Analysts pointed out that the productivity will not pickup in the next few years, implying less inflationary pressure.
The latest figures, however, are showing that the number of permanent jobs advanced n February at the fastest rate since March 2010, while salaries for permanent staff soared at the sharpest since October 2007. As the central bank is currently determined by labour market conditions, and productivity and real wage growth in particular, these figures should definitely add more pressure on Mark Carney to consider a rate hike. Earlier this year, the BoE has already claimed that even when the first move is made, it will introduce only gradual changes into the monetary policy. The second highest ever results in the number of permanent placements since the record began and improved conditions are heating speculations, Carney can sound more hawkish in April, though markets have been pricing in a first rate hike in the second quarter of 2015.
© Dukascopy Bank SA