Published today (October 23), the Minutes show that prospects for the remainder of this year are better than were forecast in August, when the Bank committed to keep interest rates on hold until unemployment hits 7 per cent, which it believed would take three years.
The Minutes said that it now “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, even at the time of the August forecasts, most private-sector economists were already expecting unemployment to fall much faster than the Bank predicted, and for interest rates to rise sooner than the late 2016 date it implied.
The 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 per cent. Inflation has exceeded this figure since December 2009, and currently stands at 2.7 per cent.
Meanwhile, figures published yesterday suggest that stronger growth is boosting tax receipts and putting the Treasury on course to undershoot official borrowing targets by as much as £10bn this year.
Public sector borrowing of £11.1bn in September was £1bn below a year before, meaning that the underlying deficit for the first half of the financial year so far stands at £56.7bn, nearly 10 per cent lower than 12 months earlier.
This puts the Chancellor on track to beat the Office for Budget Responsibility’s £119.8bn borrowing forecasts for the current financial year, due to be updated in December’s Autumn Statement, reflecting far stronger growth for the economy so far this year.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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