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BoE on hold, as expected - ING

FXStreet (Łódź) - James Knightley from ING remarks that despite the quite strong UK economic recovery, the BoE has still a lot of room to keep its monetary policy steady.

Key quotes

"Recent data revisions have shown that the UK’s recovery has been much stronger in recent years than previously stated and employment growth remains firm, which together suggest that the economy’s spare capacity may be filled earlier than thought."

"However, hints of a slight slowing in activity coupled with weaker Eurozone growth, sub-target inflation, a cooling property market and virtually non-existent wage pressures suggest that the Bank of England has plenty of room to leave policy unchanged."

"That said, there is a growing acknowledgement within the economy that the period of ultra-loose monetary policy will soon be coming to an end. Indeed BoE Governor Mark Carney himself warned in late September that “the point at which interest rates… begin to normalise is getting closer."

"In recent months the judgment about precisely when to raise Bank Rate has become more balanced. While there is always uncertainty about the future, you can expect interest rates to begin to increase”."

"We think it likely that Martin Weale and Ian McCafferty remained the only MPC members voting for a rate rise today with February the most likely start point for actual policy tightening in our view."

"The wage story will be key though and it will be interesting to see if the 3% rise in the national minimum wage this month is the catalyst for broader pay increases in the economy."

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