There were several interesting messages from today's Bank of England inflation report though the message that everybody was looking for - when will Bank rate rise - was pretty fuzzy. The markets are looking for a hike in the first quarter of next year but Mark Carney, the Bank governor, was reluctant to endorse it.
Broadly, this was an optimistic message from the Bank. Growth of 3.4% this year, followed by 2.9% in 2015 and 2.8% in 2016. Inflation will be 1.8% at the end of this year, 1.8% at the end of 2015 and 1.9% at the end of 2016. Unemployment will fall to 6.3% (from 6.8%) by the end of this year, 6% by the end of 2015 and 5.9% by the end of 2016.
On rates, the Bank expects spare capacity - 1% to 1.5% of GDP - to be used up by the end of the forecast period, i.e. by this time in 2017, but will raise rates before that, and indeed its forecast implies it will need to do so to achieve the inflation target. The first half of next year remains favourite, though the Bank is unwilling to guide too precisely. The inflation report is here.
The report came on the day of the latest unemployment figures, which remained healthy, with a drop of 133,000 to 2.21 million, or 6.8% of the workforce, in the January-March period. Employment rose 283,000 to 30.43 million, for a rise of 722,000 over the past year.
Overall earnings growth, 1.7%, was in line with inflation, but the average is dragged down by the squeeze on public sector pay and a drop in earnings for high-paid workers in professional and business services. In the latest three months total manufacturing pay was 2.9% up on a year earlier, construction pay was also up 2.9% and pay in wholesaling, retailing, hotels and restaurants up 3.2%. More here.