As slack has been absorbed, financial market expectations of the date of the first
Carney said the amount of slack in the economy is around 1% of gross domestic product. It was smaller than the 1-1.5% estimated in May.
The bank stated further that in light of the heightened uncertainty about the current degree of slack, the committee noted the importance of monitoring the expected path of costs, particularly wages, in assessing inflationary pressures.
ING Bank NV's economist
The bank estimates wages to increase 1.25% on average this year, slower than the 2.5% growth projected in May. At the same time, the estimate for the so-called equilibrium unemployment rate was downgraded to about 5.5% from 6.25%.
Data published earlier in the day showed that wages declined for the first time since 2009 and the unemployment rate hit the lowest since 2008.
The BoE said data suggests that labor market slack is being used up at a faster pace than expected three months ago. The strength in labor market quantities contrasts with continuing weakness in wage growth.
The central bank said the central path for GDP growth is similar to that in May, although it sees risks from prospective policy normalization in the US, the challenges in
The 2014 GDP outlook was upgraded to 3.5% from 3.4% and that for next year to 3% from 2.9%.
Inflation is close to the 2% target and is projected to remain close to the target in the period ahead, the bank said. Inflation is expected to be around 1.8% in two years' time.
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