"The recovery we're seeing, it is jobs intensive. Those jobs that are being created are in low wage, low productivity sectors."
- Philip Rush, chief UK economist at Nomura
The latest projections from the Office for Budget Responsibility showed Britain's unemployment rate will fall from this year 7.6% to 7.1% over the next 12 months, coming close to the central bank's threshold of 7%. At the same time the head of the U.K. fiscal watchdog pointed out the jobless rate could inch toward 7.0% as early as next year, raising the possibility of an interest rate hike sooner than expected. At the time of announcing the forward guidance, the labour market was expected to improve to the desired level in 2016.
While investors are debating on how and when the Bank of England will start making adjustments to its monetary policy, the IHS Global Insight Chief UK and European Economist Howard Archer said Mark Carney and his team is set to maintain its policy interest rate accommodative all through 2014. The projection was made even after the rosy growth outlook published on Thursday. To be more precise, he expected the BoE to start raising rate only after the third quarter of 2015.
Regarding the rate of growth, it is unlikely Britain will maintain the same pace in the foreseeable future, as it is still highly reliant on household spending and there is a growing need for stronger investment and exports.
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