The fourth quarter growth figures released by the Office for National Statistics showed that the economy grew by 0.7%, in line with expectations, but slightly below the Bank of England’s projections.
Following the release sterling initially weakened against the greenback by around 50 pips, and the subsequently recovered to back above 1.66:
Figures released earlier this morning from the Confederation of British Industry (CBI) reported that the British economy is growing at fastest pace since 2007.
How will the MPC move from here?
Mark Carneys forward guidance, had targeted a 7% unemployment rate, which would be the trigger for starting to raise interest rates. The latest release from the Office for National Statistics showed the unemployment rate had fallen to 7.1%.
Inflation has now fallen back to the bank’s target of 2%, so the pressure for the MPC to raise interest rates in the near term has subdued. The views of analysts and economists vary significantly, with some expected Q4 2014 ranging until the end of 2015.