By mid-day Wednesday, the
However, the pound has fallen against all its major trading partners, and particularly heavily against the dollar. It is down more than a cent from its Wednesday higher of
"A significant cut to the BoEs wage growth forecast saw sterling crash to a more than two month low against the US dollar, as traders took the revision to mean that the central bank won't hike rates this year, pushing back some forecasts to the start of 2015," said Alpari analyst
The bank cut its 2014 wage growth forecast in half, to 1.25% from 1.5%.
The cut comes after official data released earlier Wednesday showed the first fall in wages including bonuses in more than five years. Average earnings, excluding bonuses, grew by just 0.6% year-on-year in the three-months to June, slipping from 0.7% growth previously and disappointing economists that were expecting growth to remain stable. Including bonuses, average earnings fell 0.2%, reversing some of the 0.4% growth recorded last month.
The markets are now predicting that the Bank of
The BoE also raised its
"0.5% today is less stimulative than 0.5% before the financial crisis," Carney said.
The bank is also expecting economic growth to slow again, to 3.0% growth in 2015 and 2.6% in 2016.
It reduced its calculation of the equilibrium rate of unemployment - the rate that causes no inflation - to 5.5%, from its previous estimate of 6% to 6.5%, meaning that unemployment can continue to fall without putting extra pressure on the policy makers for a rate rise.
"Today's report comes across as a solid signal that the majority of BoE rate setters are planning to wait until next year before hiking rates," said Berenberg chief
While the pound fell, interest rate-sensitive equity sectors received a boost, with the
There has been concern among the housebuilders that the recent Mortgage Market Review, which requires stricter lending criteria, would lead to a permanent restriction on lending. However Carney said Wednesday that the MMR was "not viewed as something that would create permanent impact." Instead it should just create a higher quality of lending, the governor said.
The market focus will now switch to the US where
US retail sales data are due at
Federal Reserve member
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