The BOE inflation report illustrated that the bank will keep its borrowing cost at its record low for at least another year, as BOE Governor Mark Carney believes that recovery is not sustainable yet as there is still an output gap. Carney has changed the bank's forward guidance after the recent progress in the economy. He outlined key points which are: -The BOE said the interest rate will not be hiked unless spare capacity in the U.K. economy has been fully absorbed, which is unlikely to occur before 2015. -Raising interest rate will not only depend on unemployment rate but also on other measures such as business surveys and the number of hours worked. -When the bank starts to raise interest rates, this will take place in a gradual manner while the non-standard measures will remain on hold for some time, at least until the first rate rise. Carney defended the BOE's guidance by stating that it managed to bolster businesses confidence, given that interest rates would not be raise soon. First, Carney said that economic recovery is gathering momentum and sharply upgraded the BOE growth forecasts for this year to 3.4%, instead of 2.8% estimated in November. The BOE also foresees an expansion of 2.7% in 2015 and further acceleration to 2.8% in 2016. On the other hand, Carney cautioned "recovery is neither balanced not sustainable, yet." While unemployment rate has dropped faster than expected, the number of part-time workers looking for full time work is near a record high. In addition, productivity is still below its pre-crisis level, wage growth is weak, and the household savings rate will probably fall further. Regarding inflation, the BOE referred that inflation has been lower than forecasted, thereby easing pressure on policymakers to raise interest rate. "The near-term outlook is lower than in November, reflecting unexpectedly weak inflation outturns, smaller rises in utility prices than the MPC had assumed, and the impact of sterling's recent appreciation," BOE inflation report said. "Inflation is expected to remain at, or slightly below, the target over the forecast period, as the waning impetus from past increases in import prices and from administered and regulated prices is offset by a diminishing drag from spare capacity," the report added. In conclusion, "the MPC will seek to close the spare capacity in the economy over the next two to three years while keeping inflation close to the target." As of 11:10 GMT, the pound traded higher versus the U.S. dollar around 1.6546 after hitting a high of 1.6555.