UK services PMI grows faster than expected

The Bank of England decided to keep its key interest rate and QE programme unchanged. The interest rate will be maintained at a record low of 0.5%, while the QE programme will remain at £375 billion. Given a dramatic fall of inflation to 0.5% in December, amid a slump in oil prices, few analysts expect the central bank to consider policy normalization before the autumn. BOE forecasts indicate it could take until late 2017 to bring inflation back to the BoE's targeted level of 2%, despite healthy growth outlook and a further drop in unemployment rate. The members responsible for the interest rate-setting are concerned over a deflation risk, as policy makers saw more risk to the near term inflation on the downside, saying cheaper oil and lower import prices may persist for longer than had been expected. Nevertheless, sliding oil prices have also boosted consumer spending, as well as lowered production costs. Wages were reported to have grown slightly faster, as the economy is showing signs of improvement. The BoE has signalled it remains unwilling to raise rates until there was a sustained improvement in workers' pay. 

Meanwhile, the house prices in the UK rose much more than anticipated in January. The HPI was expected to fall from 1.1% to 0.1%, but instead it gained 0.9 percentage point up to 2% in the last month. With the HPI hike concerns over the wellbeing of UK's housing market were eased after a slowdown since May 2014.