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Bank Of England To Sit Tight On Policy

Policymakers of the Bank of England are widely expected to hold the key rate at its current record low level as the bank has pledged not to raise rates until the jobless rate falls to 7 percent. Moreover, price stability knock out conditions have not materialized in the economy to override the forward guidance.

The nine-member monetary policy committee is set to conclude the two-day rate setting meeting by retaining the key rate at 0.50 percent and the size of monetary stimulus at GBP 375 billion. The outcome of the meeting is due at 7.00 am ET.

Policymakers are more likely to focus on the quarterly Inflation Report, which will be available to the public on November 13.

It seems highly likely that the November Inflation Report will see a lowering of the BoE's unemployment forecasts, which will open the door for the bank to start raising interest rates before mid-2016, said Howard Archer, chief UK economist at IHS Global Insight.

Markets were speculating that the jobless rate will fall to the threshold well before 2016, given the speed of recovery, and an earlier rate hike from the bank.

The speedy recovery in the region has prompted many business lobbies and economic institutions to lift growth projections for the U.K.

This week, the European Commission raised its U.K. growth outlook to 1.3 percent from 0.6 percent and that for 2014 to 2.2 percent from 1.7 percent.

The National Institute of Economic and Social Research upgraded its U.K. growth estimate on the assumption that rising house prices will boost consumer spending. The think-tank projects 1.4 percent growth this year.

by RTT Staff Writer