GBP News

House prices in the United Kingdom rose at a faster pace in July, figures from the Office for National Statistics showed Tuesday.

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Bank of England Governor Mark Carney said on Thursday that the U.K. economic outlook has improved and the central bank may be getting closer to raising interest rates. Speaking at an actuaries' conference in Wales, Carney said, "With many of the conditions for the economy to normalize now met, the point at which interest rates also begin to normalize is getting closer."

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The U.K. economy grew more than estimated in the second quarter and the current account deficit widened from the first quarter, the Office for National Statistics said Tuesday. Gross domestic product grew 0.9 percent sequentially, up from the prior estimate of 0.8 percent. The annual growth was confirmed at 3.2 percent.

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Car registrations in the U.K. recorded the fastest September rise in a decade, figures from the Society of Motor Manufacturers and Traders, or SMMT, revealed Monday.

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The British economy revealed a steady pace of expansion in the three months to September and the central bank may raise interest rates in the first quarter of 2015, the National Institute of Economic and Social Research said Tuesday.

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U.K. manufacturing and exports growth slowed in the third quarter, sounding the first "alarm bell" for the economy, the British Chambers of Commerce, BCC, warned Thursday.

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The Bank of England maintained its key policy rate at its historic low once again as policymakers await more concrete signs to suggest that the economic recovery is becoming sustainable amid slowing inflation. The nine-member Monetary Policy Committee decided on Thursday to retain its key rate at a record low 0.50 percent and the asset purchase programme at GBP 375 billion.

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Sounding a more dovish note on monetary policy than he has in recent months, the governor of the Bank of England said in a rare interview with CNBC on Saturday that global weakness, lower inflation and troubles in European economies would influence policy at the bank's meeting next month.

Mark Carney didn't signal any overt change in policy ahead of the November meeting, but he was clear that the BOE would incorporate recent economic developments, which have included a downgrade to the global economy by the International Monetary Fund and recent negative growth numbers from Europe.

"There is weakness, more broadly in EMs (emerging markets) and certainly in Europe, and Europe is the largest trading partner of the UK,'' Carney said. "We have to account clearly for a more modest global recovery, particularly if that is the case in Europe. In addition, we really are concentrating on the labor markets which will be as important as external developments for the path of monetary policy."

Carney's comments were in line with other leading global central bankers at the annual meeting of the International Monetary Fund about the potential impact of global weakness on monetary policy. Federal Reserve Vice Chairman Stanley Fischer said on Saturday, "If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise."

But for Carney, the comments represent a shift. He has been saying for several months that the time for rate hikes is drawing closer. But in the CNBC interview, Carney said, "There is weaker global demand, relative to global potential. That is producing a very benign global inflationary environment and that is something that we do certainly take into account."

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The UK unemployment rate has dropped to 6% in the three months to August – its lowest level since 2008, according to the official figures.

The Office for National Statistics (ONS) said that the jobless rate fell from 6.2% in the three months to July as the number of people out of work dropped by 154,000 1.97 million.

The research body also revealed that the UK's employment rate climbed to 73.0%.

The ONS also said that the country's youth unemployment rate (for 16 to 24 year olds) dropped to 16% in the three months to August, down from 16.6% in the three months to July.

The data also showed that pay including bonuses for employees in the UK was 0.7% higher than a year earlier and wages excluding bonuses for employees in UK was 0.9% higher than last year.

In comparison, Consumer Prices Index inflation grew by 1.2% in the year to September 2014.

The figures mean that average total pay (including bonuses) for employees in UK was £479 ($762, €601) per week before tax and other deductions from pay.

"This morning's UK unemployment figure has once again surprised to the downside with the rate falling to 6.0%, below the expected decline to 6.1% and is welcome news but is unlikely to sway any more MPC members to vote for rate hikes beyond the existing two that have," said Angus Campbell, Senior Analyst at FxPro.

"We wait to see what the release of next Wednesday's minutes reveal but with inflation tumbling, key business and confidence surveys also coming off the boil and wage inflation still subdued, rate expectations for the BOE have been pushed right back. Cable (GBP/USD) initially rallied 30 points or so on the back of the figures just now, but already that move higher has fizzled out, showing what the market now thinks, which is rates lower for longer."

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Bank of England Chief Economist Andrew Haldane said the U.K. interest rates could remain lower at a record low for a longer period than he expected three months ago. If there is a genuine uncertainty about the path of the economy, the optimal policy response may be to avoid the worst outcomes, he told local business leaders in Kenilworth, central England, Friday.

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