Bank of England points to improving economic picture

UK unemployment and economic output are improving at a faster pace than expected, according to Bank of England policymakers.

Minutes from the Monetary Policy Committee’s October meeting show that prospects for the rest of 2013 are better than was forecast in August.

The minutes show that the MPC voted unanimously to keep interest rates on hold at 0.5%.

The MPC noted that business and consumer confidence continued to grow.

The UK unemployment rate is currently at 7.7%. In August, when the Bank unveiled its strategy of forward guidance, the rate stood at 7.8%.

At that time the Bank predicted it would take three years for the rate to fall to 7%, the rate at which it will start to consider interest rate rises.

The October minutes said: “It now therefore seemed probable that unemployment would be lower, and output growth faster, in the second half of 2013 than expected at the time of the August Inflation Report.”

However, policymakers were divided about how fast productivity would pick up, and by extension, how fast unemployment would fall as the economy recovers.

“It was too soon to draw a firm conclusion from recent labour market outturns about the extent to which productivity would increase,” the minutes said.

MPC members also noted a strengthening in sterling, which would push down on inflation.

The Bank’s goal is to return consumer price inflation to 2%. Inflation has exceeded 2% since December 2009, and currently stands at 2.7%.

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