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BoE: policy will depend on unemployment

GBP/USD jumped to $1.5370 after a rapid dip to $1.5205 at the time of the press conference after the BoE inflation report.

Here are the key points of the announcement:

  • UK economic recovery remains slow;
  • GDP will not reach the pre-crisis peak until next year;
  • Q3 GDP forecast: +0.6% and +2.6% in two years;
  • BoE will base its monetary policy on labor market data like US does;
  • BoE won’t hike interest rates till the unemployment falls below 7%;
  • BoE sees unemployment rate at 7.4% if rates stay at 0.5% in three years and expectes it to stay above 7% until at least Q3 2016;
  • BoE do not intend to extend their asset purchases, but they are ready for more bond purchases if necessary;
  • Inflation is seen slightly below 2% in 2015;
  • In Q4 2013 CPI is to peak at 2.9%.

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