BoE ratchets up UK growth forecast to 3.4%

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London - The Bank of England (BoE) has ramped up its British economic growth forecast for this year, and tweaked its forward guidance on interest rates.

Gross domestic product would grow by 3.4 percent this year, a chart in the bank’s latest report showed yesterday. That was up sharply from an estimate of 2.8 percent given in November last year.

“The recovery has gained momentum. Output is growing at the fastest rate since 2007, jobs are being created at the quickest pace since records began, and after four years above target the inflation rate is back at 2 percent,” governor Mark Carney said.

Carney took charge of the central bank last August and launched the forward guidance policy, under which the BoE has stated that it will not raise record-low interest rates until the unemployment rate falls to at least 7 percent.

However, the bank forecast yesterday that the jobless rate – which has fallen more sharply than expected – would hit 7 percent in the coming months.

As a result, the central bank added that it would look at a “broad range of indicators” at that point, to assess the labour market and decide on rates.

“Forward guidance is working,” Carney told journalists. “Uncertainty about interest rates has fallen. UK businesses have understood the message.”

The BoE’s key interest rate has stood at a record low level of 0.5 percent since March 2009, when the bank also launched its quantitative easing policy. - Sapa-AFP

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