Britain's recovery looking solid, but no rate change until 2015
By Jonathan Cable
LONDON (Reuters) - Britain's economic recovery is entrenched, with solid growth predicted in coming quarters, but it will be at least a year before the Bank of England tightens monetary policy, a Reuters poll found.
The Bank said in August it won't consider raising its main Bank Rate from a record low of 0.5 percent until unemployment fell to 7 percent - something it didn't envisage for three years.
Medians in the poll, however, suggest it may have already been reached - a year earlier than in a poll taken just a month ago.
Still, the survey of over 50 economists, taken this week, showed it would be the second quarter of next year before the interest rate rose - and even then by only 25 basis points.
"The economic recovery is not strong enough yet to withstand rises in interest rates and the stronger pound that would result," said Samuel Tombs at Capital Economics.
Some major risks to the recovery identified in the poll are an overheating housing market, low productivity and weak demand from Britain's key trade partner, the euro zone which is undergoing a shaky recovery.
Britain's GDP will expand 0.6 per quarter from here through to the middle of 2015, poll forecasts that did not change from last month showed.
But unemployment - to which the Bank pegged its forward guidance - is falling faster than was predicted even just a month ago. It is seen averaging 7 percent this quarter.
Forecasts in recent Reuters monthly polls have steadily tumbled - it was only in November that unemployment was not seen reaching target within the 18-month forecast horizon.
So with forward guidance now dead in the water the Bank is widely expected to revamp its monetary policy centrepiece when it publishes the quarterly Inflation Report on Wednesday.
Governor Mark Carney said last month the Bank's assessment of how to shift guidance to changing circumstances would begin in February and the vast majority of respondents in the poll expect a commitment to keeping rates on hold for an extended period.
(Polling by Swati Chaturvedi and Diptarka Roy Editing by Jeremy Gaunt)
