Bank of England policymakers have been surprised at how rapidly growth has picked up and unemployment has fallen since the spring, raising the prospect of an earlier-than-expected rise in interest rates.
The Bank’s nine-member monetary policy committee voted unanimously to leave policy unchanged earlier this month; but minutes of their meeting showed that a strong increase in employment, and upbeat readings from business surveys, had prompted them to upgrade their expectations for growth.
Discussing the upbeat jobs data released this month, the minutes said: “It now therefore seemed probable that unemployment would be lower, and output growth faster, in the second half of 2013 than expected at the time of the August Inflation Report.”
They described the latest news as pointing to a “robust recovery in activity” in the UK – though they also warn about the lack of the kind of rebalancing in the economy, towards trade and away from consumer spending, that the coalition was hoping for. “There is a risk that the recovery in the United Kingdom might be less well balanced between exports and domestic consumption than was ultimately needed.”
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