LONDON Aug 13 Bank of England Governor Mark
Carney is likely to give little away on Wednesday when he will
be pressed on how soon the central bank will start to raise
Economists and markets are split on whether more than a year
of robust economic growth might prompt the BoE to move as soon
as November, or if persistently weak wage growth and a darkening
international outlook could make it wait until early next year.
The BoE's new forecasts, to be published at 0930 GMT when
Carney begins a news conference, are unlikely to vary much from
its predictions in May. These forecast 3.4 percent gross
domestic product (GDP) growth this year and 2.9 percent in 2015,
and inflation to hover just below the BoE's 2 percent target for
the foreseeable future.
Carney has stressed that the exact timing of a rate rise
from a record-low 0.5 percent is less important than the BoE's
longer-term intention to raise rates only gradually and to a
level well below the 5 percent common before the crisis.
But this has not stopped keen market attention on the exact
date - not least because such a move would be a signal that a
major central bank thinks the financial crisis is truly over.
Sterling strengthened by nearly 15 percent against the
dollar over the 12 months to mid-June but has eased off since
then. As well as Wednesday's new forecasts and
news conference, investors are waiting for the publication next
week of the minutes of the Bank's August policy meeting to see
if a first vote was cast in favour of a rate hike.
A confusing labour market picture over the past three months
will not encourage the BoE to give clear guidance on its policy
intentions on Wednesday, said Ross Walker, UK economist at Royal
Bank of Scotland.
"It's probably going to be a bit of a holding operation ...
(unless) Carney feels that markets are in a bit of a slumber,
and that he needs to give them a wake-up call," Walker said.
Second-quarter labour market data is due at 0830 GMT, and
economists polled by Reuters expect it to show an outright
year-on-year fall in average wages, even as unemployment drops
to its lowest in years at 6.4 percent.
Economists also expect the BoE to revise down its forecasts
for wage growth while at the same time lowering its estimate of
how much slack is left in Britain's economy.
In May, the BoE said there was unused capacity equivalent to
1.0-1.5 percent of GDP, which it wants to see largely used up
before it increases rates, and this could well be lowered to a
range of 0.75-1.25 percent, according to the Reuters poll.
The one chance of a clearer signal on rates may be if Carney
thinks financial markets are again underpricing the chance of a
rate rise this year, Walker said.
In June, Carney shocked markets by saying they did not
reflect the risk of an early rate rise. Since then, pricing is
almost back to where it was before his comment. Rate futures
price a roughly one in three chance of a rate rise in November.
(Editing by Ruth Pitchford)