The Bank of England Monetary Policy Committee voted unanimously at its March 5 and 6 meeting to keep policy unchanged, with members expecting the jobless rate to decline further in coming months.
The unemployment rate held at 7.2% in the three months through January in data issued simultaneously with the minutes, but MPC members said they expected it to fall back to 7% in coming months.
They noted the market reaction to the new forward guidance revealed in February, which kicks-in when the 7% jobless threshold is reached, had been limited and they said markets were correct to interpret phase two guidance as not being a markedly different policy.
There was no discussion about the damaging impacting of sterling on the export sector, instead MPC members noted it made it more likely CPI would come in below 2.5% in 18 to 24 months.
The MPC is committed to not tightening policy until the jobless rate hits 7% and the minutes said “it seemed quite likely that the unemployment would fall to 7% during the following few months.”
The economic news between the February and March MPC meeting had limited implications for policy, the committee said.
They noted financial conditions had tightened a little on the month, with a small rise in short term rates and a 1.5% rise in sterling on its trade weighted basis.
The fourth quarter GDP was encouraging as it suggested “that the recovery over the past year might not have been as reliant on the household sector as it had previously appeared.”
The MPC, however, is divided over the inflation outlook with a range of views among members but all agreeing there was a less than 50% probability CPI would be above 2.5% in 18 to 24 months’ time.