News Column

REPEAT: BoE: More Slack To Be Absorbed Before Raising Rates

May 14, 2014

LONDON (Alliance News) - The Bank of England said the margin of spare capacity has narrowed since February. But it assessed that there remains more scope to make greater inroads into slack before raising interest rate.

When committee does start to raise the key rate, it expects to do so only gradually and to a level materially below its pre-crisis average, the bank said in its May Inflation Report on Wednesday.

The bank maintained its economic growth outlook for this year at 3.4% and estimates 2.9% growth next year. But the bank expects unemployment to fall faster than it estimated in February.

Inflation is expected to remain below the 2% target in two years.

Interest rates will remain on hold until the second half of next year, later than the markets and most economists expect, said Samuel Tombs, a UK economist at Capital Economics.

"The path of slack is uncertain, and there is a range of views on the Committee," it said. The amount of spare capacity in the economy remains around 1% to 1.5% of GDP.

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Source: Alliance News

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