Carney Leads A Unanimous Vote To Holding Stimulus, UK Jobless Claims Drop The Most In Three Years

Bank of England minutes for policy meeting held at July 3-4 showed a unanimous vote to holding both interest rate and stimulus, while unemployment data confirmed the economy is on the right track of recovery.

The new BOE governor Mark Carney and the other eight MPC members voted to keeping interest rate at its current low level of 0.50% and amount of asset purchases at 375 billion pounds as the economy shows strengthening recovery and inflation rises near the BOE's upper limit.

Carney may struggle to lower the higher yields on Brittan's 10-year gilts which risk choking off recovery.

U.K. recovery remains vulnerable due to the record-low interest rate and high market borrowing costs, the BOE said in a statement after its monetary decision for this month.

However, the most recent data has pointed to an improvement in the economy's major sectors, manufacturing, services and construction, which raises forecast of seeing further progress in the economy in the second quarter after the 0.3% expansion recorded in the first three months of this year.

Last week, the IMF raised U.K. growth outlook to 0.9%, up from 0.6% estimated in April, and predicted 0.5% expansion in the second quarter.

In last month's meeting, the voting showed a continuing split among the nine-panel committee as outgoing governor King alongside MPC members David Miles and Paul Fisher resumed their call for additional stimulus while the majority preferred to keep the APF at 375 billion pounds.

The BOE during its first forward guidance has revealed that interest rate would remain for a while, where the rise in inflation to 2.9% in June may put pressure on policymakers in the coming period to raise stimulus.

Unemployment

Jobless claims for the month of June showed a drop of 21,200 to 1.48 million, the biggest fall since June 2010, compared to estimates of 8,000, while the previous reading of -8,600 was revised to -16,200. Claimant count rate dropped to 4.4%, the lowest since December 2010, from a prior of 4.5%.

On the other hand, ILO unemployment rate for the three months ended May lingered at 7.8%, recording a drop of 57,000 to 2.51 million, the biggest fall since October last year. Employment edged up 16,000 to 29.7 million.

The British economy may record an expansion of 0.6% in the second quarter, the National Institute of Economic and Social Research said last week.

As of 08:45 GMT, the cable advanced against the U.S. dollar to take the pair to a peak of 1.5241 then it retreated to trade around 1.5200.

IMOH, Clement I.
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