The Bank of England has lowered its growth forecast for 2015 to 2.5%. This is not extremely surprising given the slower growth rate in Q1. Perhaps more importantly, the institution led by Mark Carney bases its forecasts on an initial rate hike in mid 2016 – far off into the future. They also stress that hikes will be very gradual.
GBP/USD slips under 1.57. Update: after the initial fall, we are seeing some signs of recovery in cable.
The Bank also lowers the growth forecasts for 2016 and 2017. However, they do see an upwards revision to Q1 growth from 0.3% to 0.5% – a significant upwards revision.
Regarding inflation, Carney reiterates that it could drop below zero and this is due to the strong pound as well as oil prices.
The employment forecast is not as optimistic as it used to be, with 5% within two years. That isn’t too shabby, but still a downgrade.
The Bank of England broke the self imposed silence that was in place towards the general elections. Contrary to the rate statement, which doesn’t reveal anything, the Quarterly Inflation Report already has a lot to show about the Bank’s thoughts and intentions.
Earlier, the pound rode higher on better than expected rises in wages in March and despite a smaller than predicted drop in jobless claims in April.
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